Does anyone know if trading losses from section 1256 contracts are considered investment income for the Net Investment Income Tax (3.8% tax)? My CPA says I can use these losses to offset other investment income subject to NIIT, but I'm not sure.

I went through a very similar situation last year with K-1s showing section 1256 losses, and I can share what I learned after consulting with a tax professional. The good news is that section 1256 contract losses from partnerships are generally NOT subject to the passive activity loss limitations, even if you're not actively involved in managing the partnership. This is because they're treated as investment/trading losses rather than passive business losses. For the basis limitation, if your combined capital accounts show $45k positive after the losses, you almost certainly have sufficient basis to claim the full $16k in losses. The key thing to watch for is whether you received any distributions during the year that might have reduced your basis below what's shown in the capital account. Here's what I'd recommend: 1. Report the 1256 losses on Form 6781 as you mentioned (60% long-term, 40% short-term) 2. Check if either partnership sent supplemental statements about distributions or basis adjustments 3. If you're still unsure about your exact basis calculation, consider keeping detailed records going forward since basis carries over year to year The partnership loss limitation rules are definitely confusing when you first encounter them, but for your specific situation with investment partnerships and 1256 contract losses, they're likely not going to be a major obstacle.

Has anyone successfully reported a company to the IRS for not sending 1099s? I'm in a similar spot with FOUR different companies who haven't sent mine. Getting really fed up with chasing them down every year.

I'd recommend filing with your bank statement records rather than waiting any longer. You've already made good faith efforts to get the 1099, and February is getting late in the filing season. One additional tip - when you report this as "Other Income" on Schedule 1, make a note in your records about the missing 1099 situation. If the IRS ever questions it, you'll want to show you attempted to get the proper documentation. Also consider sending one final certified letter to the company requesting the 1099 - this creates a paper trail showing you tried to resolve it properly. The most important thing is that you report the income accurately. The IRS cares more about you reporting what you earned than whether you have the physical form. Your bank statements showing $3,750 in deposits from this supplier are perfectly acceptable documentation.

Just a random thought - does anyone remember which tax software handled the COVID questions the best back in 2021-2022? I used H&R Block online and felt like their COVID sections were super confusing and poorly explained. Wondering if I should switch to something else this year.

Just to add to what others have said - you're definitely not alone in being confused about the COVID tax credits! The situation was really complicated because there were so many different programs with different eligibility rules and deadlines. For your specific situation in 2021 when you missed work due to COVID, unfortunately as an employee who used vacation time, you wouldn't have qualified for the self-employed sick leave credits that some people are mentioning. Those were specifically for people who were self-employed or independent contractors. The main things you might have missed would be the stimulus payments (Economic Impact Payments) - there were three total: $1,200 in 2020, $600 in late 2020/early 2021, and $1,400 in 2021. If you only remember getting one in 2020, you might want to check your old bank statements or tax transcripts to see if you received the other two. You can request free tax transcripts from the IRS website to verify what payments they have on record for you. If you did miss any stimulus payments, you'd need to amend your 2021 or 2020 returns to claim them as Recovery Rebate Credits, but as others mentioned, you're running up against the 3-year deadline for amendments. For your current 2024 tax return, there shouldn't be any COVID-related credits to claim.

The classification rules can definitely be tricky! One thing I'd add to the great advice already given - make sure you understand the difference between repairs and improvements when calculating your deductions. Repairs (like fixing a broken faucet or repainting) can be deducted in full the year you make them, but improvements (like adding a deck or renovating a kitchen) have to be depreciated over time. This distinction can really impact your first-year deductions if you're planning major work before renting. Also, since you mentioned buying with cash, don't forget about the startup costs associated with getting the property rental-ready. Things like advertising, professional photography for listings, legal fees, and even the cost of researching comparable rentals in the area can be deductible business expenses. One more tip - consider whether short-term rentals (like Airbnb) vs long-term rentals make more sense for your situation. Short-term rentals often generate higher income but require more active management, while long-term rentals might be easier to manage but could affect how the IRS views your level of participation in the rental activity. The LLC is definitely worth considering for liability protection, especially with short-term rentals where you have more turnover of guests. Just remember you'll still need to follow all the same tax classification rules regardless of the business structure.

This is such a helpful discussion! I'm dealing with a similar situation with a property I'm considering in Florida. One thing I wanted to add that might be useful for your planning - don't forget about state tax implications too. Some states have their own rules for vacation rental properties that can differ from federal treatment. Also, regarding your question about forming an LLC - while it doesn't change the federal tax classification rules, it can make bookkeeping cleaner. I ended up setting up a separate business bank account which makes tracking rental income and expenses much easier come tax time. Plus, some business credit cards offer better rewards for property-related purchases. One expense category I didn't see mentioned much is professional services beyond just property management. Things like having an annual inspection, pest control services, or even hiring someone to winterize the property (if applicable in your area) are all deductible business expenses that can add up. Since you're doing cash flow projections, make sure to factor in that with second home treatment, you can't use rental losses to offset other income - they can only offset rental income from that property or be carried forward. This could impact your break-even timeline depending on your expected rental income vs expenses in the first few years. Good luck with your purchase! Having this knowledge upfront will definitely help you make better decisions.

Has anyone used MileIQ app for tracking? I've been using it for about 6 months and it automatically tracks my drives and lets me swipe left for personal or right for business. Wondering if the logs it generates are sufficient for tax purposes?

Great question! You're definitely on the right track with tracking both mileage and meals. Just wanted to add a few practical tips from someone who's been through several tax seasons with similar deductions: For your mileage log, what you're doing is solid, but consider adding the specific business purpose for each trip (like "client consultation," "project delivery," etc.). The IRS likes to see WHY the trip was necessary for business. Also, keep your odometer readings consistent - some people get tripped up by forgetting to record the ending mileage. One thing I learned the hard way: if you're meeting clients at restaurants, make sure you're actually discussing business during the meal. The IRS can be picky about meals that are purely social vs. those with a legitimate business purpose. I always jot a quick note on the receipt about what we discussed. Since you're new to this, consider setting up a simple system now - maybe a dedicated folder for receipts and a consistent format for your mileage log. It'll save you tons of time come tax season. And definitely keep everything for at least 3 years in case of an audit!