Has anyone actually calculated how much this "double taxation" costs us? I make about $85k and pay roughly $6500 in FICA taxes. If I could deduct that amount, at my tax bracket (22%), that would save me $1430 per year. That's significant money!

I completely understand your frustration - this has bothered me for years too! What helped me wrap my head around it is realizing that payroll taxes and income taxes serve fundamentally different purposes, even though they both come out of our paychecks. The key insight is that payroll taxes are more like mandatory insurance premiums than traditional taxes. You're not just paying the government - you're earning credits toward future Social Security benefits and Medicare coverage. The amount you eventually receive in benefits is directly tied to how much you paid in over your working years. If payroll taxes were deductible, it would essentially mean getting a tax break on money that's going into an account with your name on it (even if it's administered by the government). That's why they're treated separately from income taxes, which fund general government operations you may never directly benefit from. That said, I totally get why it feels unfair when you're looking at your paycheck! The lack of immediate tax benefit definitely stings, especially when you're already dealing with income tax on top of it.

I went through this exact same situation last year and can definitely put your mind at ease! You should absolutely still receive your full $1,300 refund. The CP23 notice is completely separate from your current tax return refund. Think of it this way - the CP23 was addressing a debt from your previous tax period (the underpaid estimated taxes from your DoorDash work), while your refund is money the government owes YOU from your current tax return. Since you already paid the $780 from the CP23, that matter is completely resolved. The IRS won't reduce your current refund to pay a debt that's already been paid. These are processed as entirely separate transactions in their system. The only thing you might experience is a slight delay (maybe 1-2 extra weeks) in receiving your refund while they update your account records to show the CP23 payment has been processed. I was in your exact shoes last year - got a CP23 for some freelance income I messed up on, paid it immediately, then spent weeks worrying about my refund. Got every penny of my refund about 3 weeks later. You should be all set!

I just went through this exact situation a few months ago! Got a CP23 notice for underpaid estimated taxes from some freelance work I did, and I was absolutely panicking about how it would affect my refund. Here's what happened in my case: I paid the CP23 amount immediately (just like you did), and I still received my full refund exactly as calculated on my return. The two are completely separate - the CP23 addresses a previous tax period's underpayment, while your refund is from your current filing year. The only thing I noticed was that my refund took about 2-3 weeks longer than normal to process. The IRS had to update my account to reflect the CP23 payment before releasing my refund, but once that was done, I got every penny I was expecting. Keep checking the "Where's My Refund" tool - if it shows "being processed" for longer than usual, that's totally normal in this situation. Since you already cleared the $780 debt, there's no reason they would reduce your $1,300 refund. You should be getting the full amount soon!

Has anyone considered that this might actually be treated as part of the property's basis adjustment? When you inherit property, you generally get a stepped-up basis to fair market value at date of death. But inheriting property with a reverse mortgage is complicated. You might want to argue that part of what you paid was actually acquiring the property (increasing your basis) rather than deductible interest. This might not save you on current taxes but could reduce capital gains if you ever sell.

I went through something very similar when I inherited my grandmother's home with a HECM reverse mortgage. The IRS initially disallowed most of my interest deduction, but I was able to get it partially resolved. The key issue is that with reverse mortgages, the "interest" on your 1098 includes both actual interest charges AND the mortgage insurance premiums that accumulated over the life of the loan. The IRS will generally allow you to deduct the actual interest portion that accrued after you became the legal owner, but not the accumulated MIP or interest that built up before inheritance. You'll need to request a detailed payoff statement from the servicer that breaks down exactly what portion was principal, accrued interest, and MIP. In my case, about 60% of what showed on the 1098 was actually deductible once we separated out the components properly. Also, since you established it as your primary residence before paying off the loan, you have a much stronger argument for the acquisition indeductedness treatment that others mentioned. Document everything - when probate closed, when you moved in, utility transfers, voter registration changes, etc. This timeline is crucial for your case. The $32K they're claiming seems excessive unless there are penalties involved. You might want to request penalty abatement if your tax preparer gave you reasonable advice about the deduction.

Just wanted to add another perspective since I went through this last year. If your LLC didn't make any money, you should consider whether it's actually a hobby and not a business. The IRS looks at your "profit motive" and if you're not trying to make money, those expenses might not be deductible. I tried to deduct losses for my "craft business" LLC for 3 years and got audited. They disallowed everything because I couldn't prove I was really trying to make a profit vs just doing it for fun. Just something to consider!

DEFINITELY file a Schedule C!! I made this mistake a few years ago thinking I didn't need to because my LLC had almost no income, and I missed out on thousands in potential deductions. The expenses from your LLC can offset income from other sources (W2 jobs, investments, etc). One thing - make sure you keep your business and personal expenses 100% separate. The IRS scrutinizes single-member LLCs because people often try to write off personal stuff as business expenses.

Your real estate friends are missing something huge: opportunity cost. When you don't have a mortgage, you have all that cash flow to invest elsewhere. If we assume a $300k mortgage at 4%, you're paying about $12k/year in interest initially. The tax savings might be $2-3k depending on your bracket. So you're spending $12k to save $3k... meanwhile the mortgage-free person has an extra $24k+ (principal + interest) to invest every year! I paid my house off 3 years ago and have put the equivalent of my old mortgage payment into index funds. The growth has far exceeded any tax benefit I would've received.

You're absolutely right to trust your instincts here! The mortgage interest deduction is one of the most persistent financial myths out there, and it's frustrating how confidently people repeat it. The math is simple: if you're paying $15,000 in mortgage interest and you're in the 22% tax bracket, you save about $3,300 in taxes. But you still paid $15,000! You're net negative $11,700 compared to paying no interest at all. What makes this even worse is that many people don't even benefit from the mortgage interest deduction anymore. With the standard deduction at $27,700 for married filing jointly in 2023, your total itemized deductions (mortgage interest + state taxes + charitable donations + medical expenses) need to exceed that amount for itemizing to even make sense. I see this misconception all the time in tax season - people genuinely believe they're "making money" on their mortgage interest. Your brother-in-law probably means well, but remember that real estate professionals have a vested interest in people having mortgages. Congratulations on paying off your home! That's a huge accomplishment and you're in a much stronger financial position than people carrying mortgage debt just for a partial tax break.