Thanks for breaking this down! So how do I figure out exactly how much of my scholarships went to qualified expenses vs. living expenses? My 1098-T shows I received $18,500 in scholarships/grants, but tuition and fees were only $12,700. Does that mean I should have reported $5,800 as income?

Yes, based on those numbers, you should have reported $5,800 as taxable income. The calculation is pretty straightforward: total scholarships/grants ($18,500) minus qualified educational expenses ($12,700) equals taxable portion ($5,800). If you also purchased required books and supplies for your courses, keep those receipts as they can reduce your taxable amount. But things like laptop purchases, general school supplies, and dorm furnishings don't count as qualified expenses unless specifically required for a course.

The 1098-T can actually be misleading too! Box 1 only shows tuition and fees paid, not books and required supplies, which are also qualified expenses. So keep those receipts!

That's an excellent point! The 1098-T doesn't tell the whole story, and you're absolutely right that required books and supplies count as qualified expenses even though they don't show up in Box 1. This is why it's so important for students to keep detailed records of all their education-related expenses. Even things like lab fees or art supplies that are required for specific courses can count as qualified expenses that reduce the taxable portion of scholarships.

Did you have to pay for the therapist letter? I'm in a similar situation but can't afford therapy right now.

I didn't have to pay specifically for the letter. My therapist wrote it as part of my ongoing treatment. If you can't afford therapy, see if your school has counseling services - they're usually free or very low cost for students. School counselors can often provide similar documentation. Many schools also have legal aid services for students that can help you draft affidavits or formal statements about your situation. Church leaders, high school teachers who know your situation, or even employers who are familiar with your family circumstances can sometimes provide supporting letters too.

I tried that route last year. You can submit the FAFSA that way, but you'll only be eligible for unsubsidized loans unless you get the dependency override approved. Your school's financial aid office will require additional documentation to consider you for grants or subsidized loans.

That's a really good point - I hadn't even thought about the eventual sale. How exactly does that work? Do I need to track the depreciation separately for each unit or for the building as a whole?

You need to track depreciation separately for the personal portion and the rental portions. When you sell, you'll need to allocate the sale price between the units based on fair market value at the time of sale. For your personal unit, you can potentially use the Section 121 exclusion ($250k single/$500k married) if you've lived there for 2 of the last 5 years. The rental units will be subject to capital gains tax, plus depreciation recapture at 25% for all the depreciation you've claimed (or were required to claim even if you didn't). Keep detailed records of all improvements to establish your cost basis for each unit.

I switched to TaxSlayer and it handles rental properties much better than TurboTax did. Has specific sections for multi-unit properties and asks all the right questions about personal vs rental use.

Isn't that technically incorrect though? I thought you're supposed to report the full W-2 amounts exactly as they appear on the forms, then use Form 8958 to show the allocation. Wouldn't entering modified amounts on the W-2 entries potentially cause issues?

You're absolutely right that it's not the technically correct way to do it. The proper way is to enter the W-2s as they appear and then use Form 8958 to allocate. However, Free Fillable Forms has this verification issue that prevents many people from e-filing when done the correct way. It's one of those situations where the system limitation forces a workaround. The important thing is that the final tax calculation is correct and Form 8958 properly shows the community property allocation. I spoke with a tax professional before doing it this way, and they said that as long as Form 8958 is included and properly shows how you derived your numbers, it should be fine. The IRS is ultimately looking at your taxable income, withholding, and whether you've properly split community property income.

Paper filing works but it's sooo slow right now. I paper filed my MFS return from Washington state last year and it took almost 7 months to get my refund. The IRS is still catching up on their backlog.

That's a really good point I hadn't considered. Looking back at our contract, it specifically describes the fee as "payment for client acquisition services" rather than a revenue share. Would that language definitely make it a service requiring a 1099?

Based on that contract language, yes, it would most likely be considered a payment for services that requires a 1099. When the contract specifically calls it "payment for client acquisition services," the IRS would typically view that as you purchasing a service from them. If it were structured as a revenue split or commission arrangement, the contract would usually contain language about "shared revenue" or "commission splits" and might include different terms about the business relationship. The specific language in contracts really matters when determining tax reporting requirements, so you're on the right track focusing on those exact terms.

Not everyone can afford a CPA, especially small businesses just starting out. I do my own taxes to save money and questions like this are really important for DIY tax filers.

That's a fair point. I didn't mean to sound dismissive. I started doing my own taxes too but switched to a CPA once these business relationships got complicated. For DIY filers, I think the main thing is documenting everything clearly - get those W-9s from anyone you pay, track all payments meticulously, and maybe consider investing in good accounting software that flags when you need to issue 1099s. The peace of mind is worth it, even if you're handling tax filing yourself.