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Don't forget there's another option too - Section 179 deduction which lets you deduct the full purchase price of qualifying equipment. The limits are much higher ($1,160,000 for 2024). The difference is that with de minimis you're saying these are supplies/materials rather than capital assets, while with 179 you're still categorizing them as assets but electing to fully depreciate in year 1.
What would be the advantage of using one over the other in my situation? Is there any reason I should pick Section 179 instead of de minimis if all my purchases are under $2,500 anyway?
For items under $2,500, the de minimis safe harbor is generally simpler because you're treating them as ordinary business expenses rather than capital assets. This means less paperwork and tracking over time. Section 179 becomes more advantageous when you have larger purchases over $2,500 or when you might want flexibility in how much you deduct each year. With Section 179, you can choose to deduct only part of an asset's cost in the current year and depreciate the rest, which might be strategic for tax planning. But if all your items are under $2,500 and you want to deduct them fully this year, de minimis is probably the cleaner approach.
Quick tip from someone who got audited on this exact issue: Make sure you keep DETAILED records of each item. The IRS flagged my return because I had lumped several tools together as "workshop equipment" for $3,800, but when they looked at the individual receipts, no single item was over $2,500. I still qualified for de minimis, but had to go through the hassle of providing all my receipts.
This is really good advice. How detailed do you need to be though? Like itemize every single attachment and component? Or just the main tools?
From my experience dealing with the IRS on this, you want to be specific enough that each qualifying item is clearly identifiable as being under the $2,500 threshold. So if you buy a table saw with a stand and extra blades all on one invoice, you'd want to break that down into separate line items if possible. The key is that the IRS looks at the cost "per item or invoice" - so if your invoice shows "Table saw $1,800, Stand $400, Blade set $300" then each component qualifies for de minimis. But if it just says "Table saw package $2,500" then you're right at the limit and might have questions. For attachments and accessories, I usually group them with the main tool if they're purchased together and the combined cost is still under $2,500. The IRS agent I spoke with said they're mainly looking to prevent people from artificially splitting up what should be considered single purchases.
Quick question - when you convert to rental, do you use the original purchase price of appliances as the basis, or the fair market value at the time of conversion? My stove is 10 years old but still works fine.
You use the fair market value at the time of conversion to rental use, not the original purchase price. For a 10-year-old stove, that fair market value would be significantly less than what you paid for it new.
Great question about appliance depreciation! I went through this exact situation when I converted my condo to a rental two years ago. You absolutely can depreciate appliances separately from the building without needing a formal cost segregation study - this is standard practice for clearly identifiable personal property. The key is proper documentation. For your partner's new dryer, you're in great shape since it was recently purchased. For older appliances without receipts, I used online marketplaces like Facebook Marketplace and Craigslist to find comparable used items of the same brand/model to establish fair market value at conversion. One tip: take detailed photos of all appliances with model numbers visible before placing the property in service as a rental. This creates a solid record for the IRS showing what was included and their condition at conversion. The 5-year depreciation schedule for appliances will definitely give you better tax benefits in the early years compared to the 27.5-year building depreciation. Just make sure to keep everything well-documented on your Form 4562!
Is nobody going to mention that the AOTC can only be claimed for 4 tax years per student? I made this mistake with my older kid and tried to claim it for a 5th year when he took longer to graduate. Got a nasty letter from the IRS and had to pay it back plus interest.
This is so important! And to add to this, the 4 years don't have to be consecutive. So if your daughter takes a semester off or something, you don't lose that year of eligibility. The IRS tracks this by student SSN, so keep records of which years you've claimed it.
Great question about the AOTC! You're absolutely right that as the parent claiming your daughter as a dependent, you get to claim the AOTC on your return - not her. The fact that the federal loans are in her name doesn't change this at all. Regarding the income limitations you mentioned - they actually ARE factored into the AOTC, but you're right that it's not super obvious on Form 8863. The form assumes you've already determined you're eligible based on income before you even start filling it out. For 2025, the AOTC phases out between $90,000-$100,000 for single filers and $180,000-$200,000 for married filing jointly. If your MAGI is above these thresholds, you can't claim the AOTC at all. One thing to double-check: when calculating your qualified expenses, make sure you reduce the total by any scholarships your daughter received. The IRS requires you to subtract tax-free educational assistance (like scholarships and grants) from the total qualified expenses before calculating the credit. So if her tuition was $10,000, but she got $3,000 in scholarships, you can only use $7,000 of expenses for the AOTC calculation. The good news is that you're in the perfect position to maximize this credit since you have higher income and can use both the refundable and non-refundable portions!
Have you tried using the Interactive Voice Response (IVR) system? Call 410-260-7701 from the phone number you listed on your tax return. The automated system can give you status updates that sometimes aren't reflected on the website yet. Another option is to verify your mailing address is correct - I've seen cases where refunds were delayed because the system flagged address mismatches between current and previous year returns. The Maryland Taxpayer Service Division can also manually check your refund status if you've waited more than 30 days.
Thanks for the tip about the IVR system! I've been relying on the website which has been pretty unhelpful. Quick question - when you call that number, do you need any specific information beyond what's on your return? I'm worried about getting stuck in an endless phone tree if I don't have the right details ready.
You'll need your Social Security Number, the exact refund amount you're expecting, and the tax year (2024 in this case). The system will also ask for your filing status. Having your Maryland tax return handy is helpful in case it asks for any line items from your return. The phone tree isn't too bad - it usually gets you to the refund status option within 2-3 prompts. Just make sure you're calling from the same phone number you used on your return, or it might not recognize you.
I filed my Maryland return on February 8th and just got my refund deposited yesterday (March 20th), so they are definitely processing them! The timeline seems to be around 5-6 weeks for most people this year. One thing that helped me was setting up direct deposit - I noticed friends who opted for paper checks are waiting even longer. Also, if you claimed any credits like the Earned Income Tax Credit or Child Tax Credit, those seem to be taking extra time for verification. The good news is once they start processing your return, the actual deposit happens pretty quickly. Hang in there - Baltimore folks I know are all getting theirs within this timeframe!
Darcy Moore
Random thought - don't forget that if your travel was primarily for medical reasons, you can use your HSA for hotels (up to $50 per night, per person) and transportation costs like gas/mileage, parking, tolls, etc. Just not food. I did this last year when I had to see a specialist 300 miles away. Just make sure you document everything!
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Dana Doyle
ā¢Is that $50 limit still current? I thought I read somewhere it was increased recently. Does anyone know for sure?
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Chloe Zhang
I had a similar situation last year with about $4,200 in HSA withdrawals for medical expenses and travel. I was also worried about triggering an audit, but everything went smoothly with e-filing. The key thing that gave me peace of mind was creating a detailed log of every withdrawal with dates, amounts, and what each expense was for - exactly like what Gael mentioned. I also scanned all my receipts and organized them in a folder on my computer. For the travel expenses, make sure you're tracking mileage at the IRS medical rate (which was 22 cents per mile in 2023, now 21 cents for 2024). I kept a simple log with dates, destinations, purpose of visit, and miles driven. For hotel stays, I made sure to keep receipts showing the medical purpose of the trip. Your $3,800 amount is really not that unusual - medical costs add up fast these days, especially with surgery and specialist visits. The IRS sees HSA distributions like this all the time. Just keep good records and e-file with confidence!
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Grace Durand
ā¢This is really helpful advice! I'm curious about the medical mileage rate you mentioned - do you know if that 21 cents per mile for 2024 applies to both tax deductions AND HSA reimbursements? I want to make sure I'm using the right rate when I calculate my travel expenses for HSA purposes. Also, when you say you kept a log of the medical purpose for hotel stays, did you just write a note on the receipt or keep separate documentation?
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Reina Salazar
ā¢Yes, the 21 cents per mile rate for 2024 applies to both tax deductions and HSA reimbursements - they use the same IRS medical mileage rate. For HSA purposes, you can reimburse yourself at this rate for travel to medical appointments. For hotel documentation, I kept both the hotel receipt and a separate note (either handwritten or typed) explaining the medical purpose. For example, I'd write something like "Hotel stay 3/15/24 - overnight for surgery at Regional Medical Center" and attach it to the receipt. Some people just write directly on the receipt, but I preferred keeping a separate log because it was cleaner and easier to reference later. The key is just making it clear that the travel was primarily for medical care, not vacation or business.
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