This is a complex situation that touches on several important tax considerations. Based on your timeline, you should qualify for the Section 121 exclusion since you've lived in the home as your primary residence for 2 years. The subdivision itself doesn't restart this clock - what matters is your continuous ownership and use of the property. For the cost basis allocation, you'll need to split your original $480K land purchase between the portion you're selling (1.5 acres with house) and what you're keeping. The most defensible approach is usually based on relative fair market values at the time of sale, not just acreage percentages, since developed land typically has higher per-acre value. Your total basis for the sold portion would be: (allocated portion of land cost) + $450K construction + any improvements specific to that parcel (septic, driveway, utilities serving the house, etc.). A few practical tips: Document your allocation method thoroughly, consider getting at least informal comparable sales data to support your valuation approach, and make sure your subdivision is completely recorded before closing. Also check with your county assessor about potential property tax impacts on the remaining land. Given the amounts involved and complexity of the allocation, you might want to consult with a tax professional to ensure you're maximizing your exclusion and properly documenting everything for potential IRS review.

One additional consideration that might be relevant to your situation - make sure to keep detailed records of any carrying costs during the subdivision process. Things like property taxes, insurance, and utilities for the period between when you start the subdivision process and when you actually close on the sale. While these aren't typically added to your basis, they can sometimes be deducted as selling expenses, which reduces your overall gain. This is especially important if your subdivision process takes several months (which it often does), as these costs can add up. Also, don't forget about the costs of the subdivision itself - surveying fees, legal fees for the subdivision process, recording fees, and any required studies or permits. These are legitimate selling expenses that reduce your taxable gain dollar-for-dollar, which can be more valuable than adding them to basis if you're already under the capital gains exclusion threshold. Given that you're likely to qualify for the full $250K/$500K exclusion anyway, maximizing your selling expenses might be more tax-efficient than trying to increase your basis through allocations. Just make sure to categorize everything correctly and keep all receipts organized for your tax preparer.

Another thing to keep in mind is the timing of when you need to send the 1099-NEC forms. You have to get them to your contractor by January 31st and file copies with the IRS by the same date (or February 28th if filing by paper). Since you mentioned this is your first year with contractors, I'd recommend getting familiar with the process now rather than scrambling in January. You can actually prepare the forms in December once you have all your payment totals and the contractor's W-9 info. The IRS website has fillable PDF forms, or you can use tax software that handles 1099s. One more tip - make sure to keep copies of everything for your records. The IRS can ask for backup documentation years later, so having those payment records, W-9s, and proof of mailing/electronic filing will save you if they ever have questions about your contractor payments.

Just to add to all this great advice - I made the mistake of assuming Cash App would handle everything my first year too. Got a nasty letter from the IRS about missing 1099s! One thing that really helped me was setting up a separate business account on Cash App just for contractor payments. This makes it SO much easier to track business vs personal transactions when tax time comes around. You can still use your personal account for regular stuff, but having that separation saved me hours of sorting through transactions. Also, pro tip: start a simple spreadsheet right now with columns for date, contractor name, amount, and description of work. Update it every time you make a payment. Takes 30 seconds but will make preparing those 1099s in January a breeze instead of trying to reconstruct everything from your transaction history. Trust me on this one!

Great thread! I'm dealing with a similar situation and wanted to add one more resource that helped me. The IRS Publication 15-T (Federal Income Tax Withholding Methods) has detailed tables that can help you calculate withholding manually if you prefer not to use online tools. What I found most helpful was keeping track of my year-to-date withholding from both jobs using my pay stubs. I created a simple spreadsheet to monitor whether I'm on track for my estimated tax liability. This way I can catch any issues early and adjust my W-4s before getting too far off course. Also, don't forget about state withholding if your state has income tax! The multiple jobs situation affects state taxes too, and some states have their own worksheets or requirements for multiple employers. For anyone still confused, I'd suggest starting with the simple approach (checking the box in Step 2c on both W-4s) and then monitoring your first few paychecks to see if the withholding feels about right compared to your previous situation.

I just went through this exact situation a few months ago! One thing that really helped me was understanding that the key is making sure your TOTAL withholding across both jobs covers your actual tax liability for your combined income. Here's what I learned: if you use the simple approach (checking Step 2c box on both W-4s), it works well when both jobs pay roughly the same amount. But if one job pays significantly more than the other, you might want to be more strategic about which job does the extra withholding. I ended up putting all my "extra" withholding on the higher-paying job's W-4 (using Step 4c) and left the lower-paying job's W-4 pretty basic. This way the job with more consistent hours and pay handles the bulk of covering my tax liability. Also, definitely run the numbers partway through the year! I checked my total withholding in July and realized I was slightly under, so I bumped up the additional withholding by $50/month on one job. Much better to catch it mid-year than get surprised at filing time. The IRS withholding estimator is clunky but it does work if you have patience with it. Just make sure you have recent pay stubs from both jobs when you use it.

21 Just curious - what industry are you contracting in? The best app might depend on your specific situation. For example, if you're in construction, an app that handles inventory and job materials might be different than what a freelance designer would use.

Great thread! As someone who's been contracting for a few years now, I'll add that whatever app you choose, make sure to back up your data regularly. I learned this the hard way when my phone died and I nearly lost months of receipt data. Also, don't forget about bank and credit card statements as backup documentation. Even with a great receipt app, your financial institution records can serve as additional proof of business expenses if you ever get audited. One more tip - start tracking everything from day one, even small expenses like parking meters or coffee during client meetings. Those small amounts really add up over the year, and it's much easier to develop the habit now than to try to recreate months of expenses later!

I'm in a very similar situation and this thread has been incredibly helpful! I took Section 179 depreciation on business equipment in 2022 and am now facing the recapture consequences after selling in 2023. One thing I learned from my tax attorney that might be relevant - if you're married filing jointly, the recapture income gets added to your combined income, which could potentially push you into a higher tax bracket than you were expecting. Make sure to run the numbers on your total household income when calculating the tax impact. Also, for the mortgage situation, I found that providing a simple one-page summary helped a lot. It showed: (1) Normal business income 2020-2021, (2) 2022 income with depreciation benefit, (3) 2023 projected income with recapture, and (4) 2024+ projected normalized income. This timeline format made it really clear to lenders that this was a temporary timing issue, not a fundamental change in our earning capacity. The key is being proactive about the narrative rather than letting lenders draw their own conclusions from the numbers alone.

Your situation is definitely stressful, but you're not alone in dealing with depreciation recapture! I went through something very similar with business equipment a couple years ago. The key thing to understand is that when you fully depreciate an asset and then sell it, you're essentially "paying back" the tax benefit you received. Since you took $144k in depreciation in 2022, your vehicle's adjusted basis became $0. When you sold it for $132k, that entire amount becomes taxable income subject to depreciation recapture rules. For vehicles (Section 1245 property), the recapture is taxed at your ordinary income rate, not the 25% rate (which applies to real estate). So your actual tax rate will depend on your overall income bracket for 2023. Regarding whether your CPA made the right call - it really depends on your tax situation in 2022 vs 2023. If you were in a higher bracket in 2022, the large deduction might save you more than you'll pay in recapture now. It's essentially a timing strategy. For the mortgage situation, I'd recommend getting a letter from your CPA explaining this was strategic tax planning, not poor business performance. Show 2-3 years of "normalized" income to demonstrate your actual earning capacity. Many lenders understand these depreciation strategies once properly explained. Consider working with a mortgage broker experienced with self-employed borrowers - they know how to present these situations to underwriters effectively.