Thanks so much for this detailed info! So to clarify - for my regular daily routes where I'm not staying overnight, those meal expenses aren't deductible at all, right? It's only when I'm on those multi-day out-of-state trips where I have to stay in hotels?

That's correct. The deduction only applies when you're away from your "tax home" (your regular work location) overnight or long enough that you need sleep or rest to properly perform your duties. Your daily local routes with just lunch expenses wouldn't qualify, even if you're on the road all day. Only the meals during those out-of-state trips where you stay in hotels would potentially qualify for the deduction. And remember, you can only deduct 50% of the allowable meal expenses.

I use Stride. It's free and lets you track mileage and expenses. You can categorize each expense and add photos of receipts. It also shows you the per diem rates for different locations. I've been using it for 2 years now and it makes tax time way easier.

There are some exceptions to this though! Even if you take the standard deduction, you can still deduct things like student loan interest, IRA contributions, self-employment taxes, and health insurance premiums if you're self-employed. These are called "above-the-line" deductions and they work differently.

Absolutely right! Those "above-the-line" deductions reduce your Adjusted Gross Income (AGI) directly and you can claim them regardless of whether you take the Standard Deduction or itemize. This is why tax terminology is so confusing for beginners - there are "deductions" that aren't affected by the Standard Deduction vs. itemizing choice. Thanks for pointing that out!

Yeah but tax software can mess this up sometimes. I had a friend who had major medical expenses that would have pushed him over the threshold to itemize, but his software didn't properly explain this to him. Always worth double-checking if you have unusual expenses.

Both are definitely mortgages - we used them simultaneously to purchase the home (one conventional loan and one through the employer's first-time homebuyer assistance program). The employer loan doesn't show up anywhere on the W-2, it's a completely separate arrangement with its own 1098. I'm wondering if it's because the employer loan has a much lower interest rate (2.5% compared to 3.25% on the main mortgage), and that's somehow affecting the overall calculation? Could a lower rate on the second mortgage somehow reduce the total benefit?

That's interesting. Even with the lower rate, more interest should still be more deduction. The fact that it's an employer loan makes me think there might be some fringe benefit taxation going on behind the scenes. Check if the interest rate on the employer loan is below market rate. If it is (which 2.5% would likely qualify as), the IRS can consider the difference between your rate and the market rate as taxable income - essentially treating the below-market rate as a benefit from your employer. This "imputed income" might be what's reducing your refund when you add the second 1098.

This is a really good point. AMT can definitely cause this kind of counterintuitive result. The software should tell you if AMT is being applied though - there's usually an AMT worksheet or form that appears.

What's the Form 8606 got to do with all this? I've heard you need to file that form for some retirement distributions but I'm not sure when it's required.

Form 8606 is crucial when dealing with nondeductible IRAs or Roth conversions. You'll need to file Form 8606 if your client made nondeductible contributions to traditional IRAs (to track basis), received distributions from traditional, SEP, or SIMPLE IRAs and has basis in any traditional IRA, or converted amounts from traditional/SEP/SIMPLE IRAs to a Roth IRA. If your client has made nondeductible contributions to traditional IRAs in the past, you'll need Form 8606 to determine the taxable portion of any distribution using the pro-rata rule. Without this form, the IRS might assume the entire distribution is taxable, even if part of it represents a return of already-taxed contributions.

Pub 590-B has separate worksheets depending on the type of distribution. For regular distributions, use Worksheet 1-1. For Roth distributions, use Worksheet 2-1 to determine if it's qualified. For figuring the taxable part of non-qualified Roth distributions, use Worksheet 2-2. The key is knowing which worksheet applies to your situation.

Thanks! I found the right worksheet. You're right that there are different ones depending on the type. I was using the wrong one initially which made everything confusing. I'm going to try working through the calculations again with Worksheet 1-1 since this is a traditional IRA distribution.

Thanks for mentioning this! I did get a T4A with the RESP payments in box 42 and included that when I first started my return. So my refund calculation already included that taxable income. I think what happened is exactly what the first commenter explained - the tuition credits reduced my tax payable, which affected my refund calculation. I'm going to look into transferring some of the credits to my parents since they're in a higher tax bracket anyway.

That's good that you already included the T4A! Then yes, what's happening is just the normal tax calculation with the tuition credits. If your parents are in a higher tax bracket, transferring the maximum allowable amount to them probably makes the most sense for your family overall. Just remember you can only transfer after using what you need to zero out your own federal tax, and the maximum transferable is $5,000 of the federal amount.

Would it be illegal to just not include the T2202A form? Since it makes the refund lower?