Thanks for the info! We haven't been taking depreciation deductions for that rental period, but I didn't realize we might still need to deal with "allowed or allowable" depreciation. The room was about 15% of the total square footage. Do you know if we need to do separate calculations for each ownership period (her alone vs. after marriage), or can we just do one calculation for the whole ownership period?

You'll need to handle the depreciation recapture for the portion that was rented (15% in your case) regardless of whether you took the deductions or not. The IRS considers depreciation to be "allowed or allowable" even if you didn't claim it. For your second question, you'll do one continuous calculation covering the entire ownership period. The fact that you got married during ownership doesn't create separate calculation periods. What matters is the total qualified use as a primary residence. You'll track the entire ownership timeline, identify the rental period for that 15% portion, and then calculate accordingly. The marriage itself doesn't reset or change the calculation method - it just potentially increases your exclusion amount from $250K to $500K if you both meet the use test.

Thanks! I'll give H&R Block a try. I've got all our documentation organized, including the substantial kitchen renovation we did that should increase our basis. Anything specific I should watch for when entering the info about the pre-marriage ownership period?

When entering the pre-marriage ownership period, make sure you correctly identify who owned the property during each timeframe. H&R Block will specifically ask about the ownership history. Be careful to enter the original purchase date and amount accurately for the spouse who owned it first. For your kitchen renovation, definitely include that as it increases your basis and reduces your capital gain. The software will prompt you to enter major improvements separately from the purchase price. Also, don't forget to include selling costs (like realtor commissions and closing costs) as they also reduce your taxable gain. The software does a good job walking you through all of this, just be methodical about following each step.

That's such a good point about the brokerage account! We hadn't even considered that her local bank might not be able to receive the stocks. Did you have to set up the international account from the US side or did your daughter have to do it locally?

We had to coordinate from both sides. My daughter had to open a specific type of account with a brokerage in Australia that had international capabilities. Then on our end, we had to complete special transfer forms with our US brokerage that included her foreign account details and some extra documentation verifying her identity. It wasn't particularly difficult, but it did take about 3 weeks to get everything set up properly. Her brokerage also required documentation showing the origin of the assets (basically proving they were a gift and not some kind of suspicious transfer). Just make sure to start the process well before you want to actually transfer the stocks.

Good point! Bermuda actually has no income tax, capital gains tax, or gift tax. It's basically a tax haven which makes it pretty ideal for receiving assets. She might still need to report foreign accounts depending on local regulations, but tax-wise she's in a pretty advantageous position.

How many trades do you need to do to qualify as a "trader" for the IRS? I do about 20-30 trades a month. Is that enough?

There's no specific number that automatically qualifies you. The IRS looks at several factors: trading frequency (daily is best), holding periods (shorter is better), time devoted to trading (more is better), and whether you depend on the income. Your 20-30 trades monthly might be enough if they're your primary activity and you hold positions briefly. The courts have generally supported trader status for those doing hundreds of trades annually, spending several hours daily on trading, and holding positions for very short periods. But it's a facts-and-circumstances test, not just a number threshold. I'd recommend consulting a tax pro who specializes in trader taxation since the benefits can be substantial but the requirements are strict.

Most brokers can export your trades in a format TurboTax can import. Look for a .TXF file export option on your broker's tax documents page. If they don't offer that, you might be able to download your transactions as a CSV and convert it using a third-party tool.

Thanks for the tip! Just found the .TXF export option on my broker's website. That's going to save me hours of manual data entry. I was dreading having to type in all those trades one by one.

That's a really good point about business expenses! My partner definitely had work-related costs during those years, like tools and supplies. Do you know if they can still claim those deductions when filing so late? And did your sister's husband end up having to file for all the missing years?

Yes, they can still claim legitimate business deductions when filing late returns. The key is having some form of documentation or reasonable estimates that could be justified if questioned. Even if they don't have perfect records, they should make reasonable estimates of business expenses rather than filing as if they had none. My sister's husband ended up filing 7 years back (which was what the IRS requested when they contacted him). The IRS was primarily concerned with the most recent years and years where he had significant income. They worked out a payment plan and the whole process was less catastrophic than they initially feared.

This is true but a bit alarmist. Yes, improperly claiming exempt is an issue, but the IRS distinguishes between tax avoidance (legal but aggressive) and tax evasion (illegal). Most cases like this end up as civil matters with penalties and interest, not criminal tax evasion charges.

That's super helpful. I never really thought about how much the standard mileage rate might add up to. We've been tracking every little receipt but maybe we're making it harder than it needs to be! Do you have a recommendation for a good mileage tracking app?

We use Stride, but there are tons of good ones like MileIQ, Everlance, or even Quickbooks Self-Employed. Most have free versions that work fine. The key is finding one that automatically detects drives so you don't forget to log them. Also make sure it lets you classify trips as business or personal, and export reports at tax time. Some even estimate your tax savings as you go which is really motivating!

Dash cams are deductible?! I bought a really nice one last year for $230 and didn't deduct it. Can I still claim that on this year's taxes or add it to last year somehow?