What counts as "detailed records"? I've been keeping receipts but not much else. Should I be doing more?

Receipts are a good start, but you should also note exactly what each expense was for. Create a spreadsheet that categorizes everything as either a repair or improvement. Take dated photos before, during, and after major work. Keep copies of contracts with any contractors. For example, don't just have a receipt that says "bathroom work - $3,500." Have documentation showing it was a complete bathroom remodel with new fixtures, tile, etc. This makes it clear it's a capital improvement rather than a repair. The IRS can get very picky about what qualifies as an immediate deduction versus what must be depreciated.

I've used TurboTax for my two rental properties for about 3 years. It works fine for basic rental situations but gets confusing with complex renovations. There's a section specifically for rental properties where you can enter all your income and expenses. It'll walk you through depreciation too.

This is really helpful - I had no idea there was a threshold at $25k! Do you think I should try to pay $3k now to get under that limit? Would that speed things up or just complicate the application I already submitted?

Making a payment to get under the $25k threshold would definitely help speed things up. The streamlined process is much simpler and typically processes faster. It won't complicate your existing application - the IRS will just see that you've made a payment and recalculate your plan based on the new balance. Just make sure you use Direct Pay on the IRS website and select the correct tax year and reason for payment (installment agreement request). A $3k payment now would also save you quite a bit in penalties and interest over time.

Yes! The IRS2Go app is actually really good for making payments. It links directly to IRS Direct Pay and the other payment processors. I used it last year when I was in a similar situation and it worked perfectly. The interface is much easier than navigating the main IRS website.

How exactly do you track both methods side by side? Do you need to keep all receipts for gas, maintenance, etc. even when using standard mileage? Seems like a lot of extra work.

I keep all receipts and track all car expenses in a simple spreadsheet regardless of which method I use. Yes, it's a bit of extra work upfront, but it takes me maybe 5 minutes a week to update. The spreadsheet has columns for date, expense type (gas, insurance, repairs, etc.), amount, and mileage. At the end of each year, I total up all the actual expenses and multiply my business miles by the standard rate, then compare. This way I can see which method would be better and make an informed decision if I want to switch.

Not everyone can afford to have a separate vehicle just for business though. That's a pretty big expense just to make taxes easier. How did you justify the cost of an entire extra car, insurance, registration, etc.?

Thanks for pointing this out! We actually did a bathroom remodel (~$22k) and replaced all the windows (~$15k) a few years ago. I have receipts for everything. Do these improvements get listed somewhere specific on the tax forms?

You'll add those improvement costs to your original purchase price when calculating your adjusted basis on Form 8949. So if you bought the house for $200k and did $37k in improvements, your adjusted basis would be $237k. The difference between your selling price (minus selling expenses) and this adjusted basis is your actual gain for tax purposes. This means your real gain is likely even lower than you initially calculated, putting you even further below the $500k exclusion threshold. Still need to report it though!

You'll list it on Form 8949 first (Part II for long-term holdings) with code "H" in column (f), then the excluded amount as a negative number in column (g). Then the totals flow to Schedule D, Line 8. If you're using software like TurboTax or H&R Block, they should walk you through this if you tell them you sold your primary residence.

11 Is that different from the mega backdoor Roth? I've heard about that one but don't fully understand it. Something about using your 401k?

22 Yes, they're different strategies. The regular backdoor Roth is what I described - contributing to a traditional IRA then converting to Roth when your income exceeds the limits for direct Roth contributions. The mega backdoor Roth involves making after-tax (not Roth) contributions to a 401(k) plan above the standard employee contribution limit, then either converting those to Roth inside the plan or rolling them over to a Roth IRA. It requires a 401(k) plan that specifically allows after-tax contributions and in-service distributions or rollovers. The potential contribution amounts are much larger - potentially up to $40,000+ per year depending on your plan's limits and your other contributions.

16 Are there companies that help set up self-directed IRAs? My regular brokerage only lets me invest in standard stuff like stocks and ETFs.