Does anyone know if TurboTax handles Form 1116 correctly with these HTKO adjustments? I've been using it for years but never really understood if it's doing the qualified dividend calculations properly.

I've been dealing with similar Form 1116 confusion for years with my international investments. After reading through all these responses, it's clear that the HTKO adjustment should use the GROSS amount before qualified dividend adjustments, but I wanted to add something that might help others. One thing that really helped me understand this was realizing that Form 1116 is essentially doing two separate calculations: (1) determining how much foreign tax credit you're eligible for based on ALL your foreign income, and (2) figuring out how that income gets taxed in the US (where qualified dividends get special treatment). The HTKO section is part of calculation #1 - you need the full gross amount to properly establish your foreign tax credit limitation. The qualified dividend preferential treatment happens later in the form when calculating your US tax liability on that income. For Grace's situation with $14,500 in foreign dividends, you'd report the full amount in the HTKO section, then let the form handle the qualified dividend portion separately. This ensures you get the maximum allowable foreign tax credit while still getting the benefit of qualified dividend tax rates where applicable.

As a small business owner who's been through this exact situation, I'd recommend getting really clear on your record-keeping system first before deciding between direct vs indirect categorization. For your F-150 that's 100% business use, the key is consistency. If you're billing clients for travel time or including vehicle costs in your job estimates, then fuel and maintenance tied to specific jobs would be direct costs. Otherwise, treat them as indirect overhead expenses - both are fully deductible either way. Since you mentioned you already track mileage, consider using a simple app like Everlance or TripLog to automatically categorize your trips by job site. This creates the documentation trail you'll need if the IRS ever comes knocking. I learned this the hard way when I got selected for review and had to reconstruct months of driving records. One more tip: if you're doing the actual expenses method (which sounds like it might work better for you given construction vehicle wear and tear), keep a dedicated business credit card just for truck expenses. Makes tax prep so much easier when everything's in one place.

I'm new to running my own business and this whole thread has been incredibly helpful! I've been stressing about vehicle expense categorization for months. One question I haven't seen addressed - what about when you use your work truck for multiple purposes in the same trip? Like if I drive to pick up materials at Home Depot, then swing by a job site to drop them off, then grab lunch on the way back to the office? How do you handle tracking something like that? Also, for those using apps like MileIQ or TripLog, do they integrate well with QuickBooks? I'm trying to streamline my bookkeeping process and don't want to end up manually entering everything twice. Thanks to everyone who's shared their experiences here - definitely saving this thread for future reference!

Just wanted to add that timing your sale might be important here. Since you've already used it as a rental for 2.5 years, you only have another 2.5 years before you'd fail the 2-of-5 year test! If you delay selling and cross that 3-year rental mark, you might lose your eligibility for the exclusion entirely. Something to keep in mind if you're on the fence about selling now vs later.

This is such a common situation and you're definitely on the right track! I went through almost the exact same scenario a few years ago - lived in my house for 8 years, converted to rental for about 2 years, then sold. The good news is that you absolutely can still claim the capital gains exclusion since you meet the 2-of-5 year residence test. The rental period doesn't disqualify you from the exclusion at all. A few things to keep in mind that helped me: - Make sure you have good records of when you moved out and started renting (lease agreements, utility transfers, etc.) to establish the timeline - The depreciation recapture that others mentioned is real - I ended up owing about $8,000 on that portion at the 25% rate - Don't forget about any improvements you made during your 9 years of living there - those can be added to your cost basis One thing I wish I had known earlier is that you're actually running against a clock now. Since you've been renting for 2.5 years, you only have another 2.5 years before you'd lose eligibility for the exclusion entirely. So if you're planning to sell anyway, sooner rather than later might be beneficial tax-wise. The whole process was much more straightforward than I expected once I understood the rules. You're in a good position!

I'm just curious - how much was the depreciation recapture tax hit for those who had to pay it? I'm in year 2 of renting out my primary residence and considering moving back in specifically to avoid capital gains taxes when I eventually sell. My house has appreciated about $180k since I bought it, and I'm trying to calculate if moving back for 2+ years makes financial sense versus just selling it as an investment property and paying the capital gains tax.

Based on your situation, you should be able to claim the full Section 121 exclusion without any issues. You clearly meet the ownership and use test (2 out of 5 years before sale), and the key factor working in your favor is that you moved back into the home and lived there until you sold it. The non-qualified use rules from 2008 specifically state that any period AFTER the last date you used the property as your principal residence doesn't count against you. Since your rental period (2015-2017) occurred BEFORE your final period of residence (2017-2024), it shouldn't affect your exclusion eligibility at all. However, you will need to recapture any depreciation you claimed during the rental period at the 25% rate - this is separate from the Section 121 exclusion. Make sure you have good records of the rental period dates, and keep documentation showing when you moved back in (utility bills, address changes, etc.) in case the IRS ever asks. Given the complexity and the significant money involved, you might want to consider getting a professional analysis of your specific situation to make sure you're reporting everything correctly. The peace of mind is usually worth it when dealing with large capital gains.

Important question: when did you leave your company compared to when you exercised the options? If there was a significant gap (like more than 3 months), there might be an issue with the 409A valuation they used for the FMV. Companies are supposed to use updated valuations, and if they used an outdated one, you might have grounds to dispute the valuation with the IRS.

This is a really complex situation that highlights why equity compensation taxation is so tricky. Based on what you've described, it sounds like there were multiple communication failures between SecFi, your former employer, and potentially even your accountant. One thing that stands out is that you mentioned SecFi told you taxes were "covered" but then your former employer reported wages on a W-2. This suggests there might have been withholding taxes paid (which SecFi may have included in their financing) but the W-2 income wasn't properly accounted for on your tax return. A few immediate steps I'd recommend: 1. Get a wage and income transcript from the IRS for 2022 - this will show exactly what was reported and any withholding credits you might be entitled to 2. Request detailed documentation from SecFi showing exactly what taxes were withheld and paid on your behalf 3. File an amended return (Form 1040X) to properly report the W-2 income, which should also credit any withholding that was already paid The good news is that if taxes were actually withheld but not credited to your account, you might not owe as much as you think. The bad news is that NSO exercises almost always result in a significant tax liability that goes beyond just withholding. Going forward, always assume you'll get a W-2 for NSO exercises and that additional taxes beyond withholding will be owed. These financing companies are in the business of providing capital, not tax advice, regardless of what their reps might say informally.