Thanks for bringing this up! I didn't even think about quarterly taxes. How do you calculate how much you need to pay each quarter? Is there a minimum threshold before you have to start doing that?

You generally need to pay quarterly estimated taxes if you expect to owe at least $1,000 in taxes for the year after subtracting withholdings and credits. The IRS has a "safe harbor" rule where you won't face penalties if you pay at least 90% of the current year's tax liability or 100% of the previous year's tax (110% if your AGI was over $150,000). For calculating the amount, you'd take your expected crypto income, combine it with any other self-employment income, then calculate the tax (including self-employment tax) and divide by four for each quarter. The deadlines are April 15, June 15, September 15, and January 15 of the following year.

Can you really deduct part of your phone bill? How would you even calculate what percentage is used for mining vs regular use? I'm using one of these apps too but it seems hard to document.

Thanks for suggesting the 529 plan option. My concern with selling outright is the capital gains tax - we've owned the property for about 12 years and it's appreciated significantly. I was under the impression that if I used a 1031 exchange, I could defer those taxes indefinitely, whereas selling and using for college would trigger immediate tax liability. Are you saying there's some education-related exemption for capital gains that I'm not aware of? That would definitely simplify things if so!

I think I wasn't clear - there's no special education exemption for capital gains on rental property sales. You would indeed face capital gains taxes if you sell without a 1031 exchange. What I meant was more about weighing the complexity of the 1031 process against your goals. If college funding is the primary objective, sometimes it's worth taking the tax hit for simplicity and flexibility. However, if preserving wealth long-term is equally important, then the 1031 approach makes more sense despite the additional complexity. The 529 suggestion was separate - if you do sell, putting some proceeds in a 529 would give tax-free growth for the education portion.

This is really important! I made this exact mistake with my daughter's housing during college. I did a 1031 exchange, put her in the property, charged her below-market rent, and got audited three years later. Had to pay back taxes plus penalties because the IRS reclassified it as a personal residence. Document EVERYTHING and charge fair market rates!

Thanks for explaining! So if I understand correctly, on my tax return I would indicate that I CANNOT be claimed as a dependent on someone else's return (since I provide more than half my own support), and then separately I'd try to claim my brother as my dependent if I meet all those tests you listed?

That's exactly right. You would check the box indicating that no one else can claim you as a dependent on their return. This is different from "claiming yourself as a dependent" which isn't a thing. Then separately, you would list your brother as your dependent if you meet all the qualifying relative tests. Make sure you have documentation showing you provided more than half his support - things like receipts for rent, utilities, food, clothing, medical expenses, etc. This is especially important since claiming siblings is something the IRS sometimes looks at more closely.

You're right! A sibling can be a qualifying child if they're under 19 (or 24 if a student), they lived with you for more than half the year, they didn't provide more than half of their own support, and they meet the other tests. The benefit of qualifying child vs. qualifying relative is that there's no income limit for a qualifying child. So even if OP's brother made more than $4,950, they might still be able to claim him as a dependent under the qualifying child rules.

Do you use any specific software or method to track this? I'm trying to figure out the best way to separate everything while still filing on one Schedule C.

I use QuickBooks Self-Employed and set up different categories for the income streams. So all income gets tagged as either "Performance Revenue" or "Teaching Revenue" when it comes in. For expenses, I either assign them fully to one activity or split them by percentage if they benefit both parts of the business. It's fairly simple once you set it up. The important thing is consistency throughout the year. I used to try tracking everything in spreadsheets, but it became too time-consuming. Having a system that can generate reports showing the profitability of each activity separately while still maintaining one overall business has been incredibly helpful for both tax purposes and business decisions.

I've used FreeTaxUSA for my two related businesses (web design and digital marketing) and it handles it fine. You just list both activities in the business description field and then enter all income and expenses together. Way cheaper than TurboTax too.

What about STRIPS or zero-coupon Treasury securities? Are those considered US obligations too? I think I might have some of those.

Yes, STRIPS (Separate Trading of Registered Interest and Principal of Securities) and zero-coupon Treasury securities absolutely count as US obligations. They are direct obligations of the US government, just structured differently than traditional Treasury bonds. The capital gains from these would also be exempt from state income tax in most states. Make sure to include those when calculating your exempt amount. They can be a bit trickier because they don't pay periodic interest, but any gain from selling them would qualify for the state tax exemption.

California follows the general rule - interest from US government obligations is exempt from state income tax. This includes the interest portion of any capital gains. However, California does have some specific reporting requirements. Make sure you're using the California Schedule CA to make the adjustment. You'll report the full amount of your interest/gains on federal obligations on your federal return, then subtract the exempt amount on Schedule CA.