I've been following this discussion and it's been really helpful! As someone who just started freelancing and is dealing with SE taxes for the first time, I was making the same mistake as Dylan - thinking the two adjustments were double-counting. The parallel universe example from Yara really clicked for me. I've been trying to wrap my head around why self-employment seems so complicated compared to regular employment, but now I see it's actually trying to create equivalent treatment between the two situations. One thing that helped me solidify this understanding was looking at actual Form 1040 and Schedule SE side by side. You can see how the SE tax calculation (with the 0.9235 factor) happens on Schedule SE, while the AGI deduction (half of SE tax) goes on Form 1040. They're literally affecting different parts of your tax return! For anyone still struggling with this concept, I'd recommend working through the forms manually at least once. It makes the distinction between SE tax calculation and income tax treatment much clearer when you see where each number actually goes.

This has been such an enlightening thread! As someone who's been preparing taxes professionally for a few years, I see this confusion about SE tax calculations come up constantly with clients. What I always tell people is to think of it as "separate but related" calculations. The 0.9235 factor isn't really a "deduction" - it's more like a conversion factor that makes self-employment income comparable to employee wages for FICA purposes. Regular employees don't pay FICA on their employer's share of the taxes, so we need to back that out for SE individuals too. The AGI deduction is completely separate - it's purely about income tax fairness. Since businesses can deduct their employer FICA contributions as operating expenses, self-employed people need equivalent treatment on their income tax return. I love the parallel universe analogy someone used earlier - that's actually how I explain it to confused clients! The key insight is recognizing these serve different tax systems (SE tax vs income tax) rather than being redundant benefits within the same system.

Dont overthink this. I've had foreign capital gains for years and its pretty simple. Report the gains on Schedule D like normal, fill out form 1116 for the foreign tax credit. Done. The tricky part is making sure your categorizing everything right on the 1116. Capital gains go in the "passive category income" section. Also dont forget to convert everything to USD using the right exchange rates.

I went through this exact same situation last year with foreign stock sales from Germany. A few things that helped me: First, yes you definitely report the $32k as capital gains and can claim the FTC for the $4.2k you paid. Make sure you have documentation showing the foreign taxes were actually paid and assessed on the same income. For software, I ended up using TaxAct Premium after the free versions couldn't handle it properly. It has a specific section for foreign capital gains and walks you through Form 1116 step by step. Cost about $50 but saved me from potential mistakes. One thing to watch - make sure you're using the correct exchange rate for the date of sale when converting your foreign currency amounts to USD. The IRS is picky about this. I used the daily rate from their website for the transaction date. Also keep in mind the FTC might be limited if your effective tax rate in the foreign country was much higher than what you'd owe in the US on that same income. Any unused credit can carry forward up to 10 years though. Good luck with your filing!

Has anyone actually recovered their FULL AMT credit eventually? I paid almost $26k in AMT three years ago from exercising ISOs and have only recovered about $7k in credits so far. At this rate it'll take like 8 years to get it all back!

This is such a frustrating situation, and unfortunately you're not alone in getting bad advice from tax preparers about ISOs. The EA you spoke with was definitely wrong - ISOs absolutely trigger AMT when exercised, even if you don't sell. I went through something similar a few years back and ended up owing $23k in AMT after exercising options. What really helped me was keeping detailed records of everything - not just relying on TurboTax to track the credits properly. I created a simple spreadsheet with the AMT amount paid each year and credits used, because I've heard too many stories of people losing track when switching software. One thing to watch out for: make sure your company reported the correct fair market value on Form 3921. I've seen cases where the FMV was calculated incorrectly (especially for private companies), which can significantly impact your AMT calculation. If something seems off about the numbers, it might be worth having someone review the form before you file. The silver lining is that AMT credits don't expire, so you will eventually get that money back. It just takes patience unfortunately.

No one has mentioned tax credits! The formula isn't just "tax liability minus taxes paid." Tax credits come into play too and could explain the discrepancy. Tax due = Tax liability - (Taxes paid + Tax credits

I had a very similar issue last year and it drove me crazy for weeks! The $529 difference you're seeing could be from several sources that aren't immediately obvious: 1. **Additional Medicare Tax** - If your income exceeded certain thresholds ($200k single/$250k married), there's an extra 0.9% Medicare tax that gets added to your total tax liability. 2. **Net Investment Income Tax** - If you have investment income and your modified AGI exceeds the thresholds, there's a 3.8% tax on investment income that gets tacked on. 3. **Premium Tax Credit Reconciliation** - If you received advance premium tax credits for health insurance through the marketplace, you might owe some back if your actual income was higher than estimated. 4. **Prior Year Balance** - Sometimes there's an outstanding balance from a previous tax year that gets rolled into your current year's amount due. The best thing to do is go through your tax form line by line and look for any additional taxes or adjustments that might not be part of your basic income tax calculation. These "extra" taxes can really throw off the simple liability-minus-payments formula that most people expect to work. Check lines 16-23 on Form 1040 - that's where most of these additional taxes show up. One of those lines probably has that missing $529!

My experience was completely different from what others are saying. I cashed out a whole life policy last year and got hit with a huge tax bill! I think it depends on how much you're getting back compared to what you put in.

Your Banner agent is definitely using scare tactics to push their investment products. The "half your cash value" claim is completely false and shows they either don't understand tax law or are intentionally misleading you. Here's what actually happens: You're only taxed on gains above what you paid in premiums (your cost basis). Since you've been paying $75/month since 2019, you've likely paid around $4,500+ in premiums for a $3,000 cash value, meaning you'd owe ZERO taxes. Even if there were taxable gains, it would be taxed as ordinary income - not some arbitrary "half" penalty. There's no special tax penalty for cashing out life insurance. I'd recommend: 1. Call Allstate for your cost basis documentation 2. Keep that $3,000 for your emergency fund or debt payoff 3. Consider finding a new agent who doesn't use fear tactics You made a smart financial move switching to term life insurance and getting better coverage for less money. Don't let pushy sales tactics make you doubt that decision!