I had no idea about university tax assistance programs. I'll definitely look into that! One question though - can I still claim education tax credits if I'm being claimed as a dependent on my dad's taxes? And would those credits go on my return or his?

If you're claimed as a dependent on your dad's tax return, then HE would claim any education tax credits based on your expenses, not you. The American Opportunity Credit and Lifetime Learning Credit would go on his return, which could help offset some of the family's overall tax burden. Your father should definitely look into claiming these credits since they can be substantial. The American Opportunity Credit can be up to $2,500 per eligible student, with 40% of it potentially refundable. Just make sure he has documentation of your qualified education expenses.

I work in a university financial aid office, and this is definitely worth trying. Many students don't realize we often have flexibility in how we structure aid packages. We can sometimes designate more of your aid specifically for qualified educational expenses rather than living expenses, which can help with the tax implications.

But what about expenses that only benefit the rented bedroom during the first half of the year? Would those be 100% deductible or still just 1/3?

If the expense only benefited the rented bedroom and had no benefit to your personal use areas, then you could deduct 100% of that specific expense. For example, if you painted only the rented bedroom or replaced a window in only that room, those would be fully deductible. However, most home expenses (like roof repairs, HVAC, plumbing, exterior painting, etc.) benefit the entire property and would need to be allocated based on the portion used for rental (1/3 in your case for the first period).

So would the first half of the year be considered a "rental of a portion of unit" and the second half be a separate "entire dwelling unit" rental on Schedule E? Or do you combine them somehow?

Does the 3rd shareholder also need to file an amended personal return if they didn't initially report their share of S-Corp income?

Yes, absolutely. Once you issue them a K-1 (even retroactively), they'll need to amend their personal return to include their share of the S-Corporation's income, deductions, credits, etc. This is crucial because the IRS matches K-1 information against individual returns. If your corporation was profitable and distributions were made, this could result in additional tax liability for that shareholder. If it showed losses, they might actually benefit from amending to claim their share of the losses (subject to basis limitations).

Form 8832 is typically used when you want to change how your business is classified for tax purposes (like switching from partnership to corporation). It's generally NOT needed for simply adding or changing shareholders in an existing S-Corp. What you need is an amended 1120-S and revised K-1s. Your accountant might be confusing this with Form 2553 (Election by a Small Business Corporation) which is used to elect S-Corp status in the first place. If your accountant is suggesting Form 8832 for this situation, I'd honestly get a second opinion.

Is there a simple way to figure out which credits I might qualify for? There seem to be so many and the eligibility requirements are confusing.

The most common credits for younger people are the Earned Income Tax Credit (if your income is below certain thresholds), education credits like the American Opportunity Credit or Lifetime Learning Credit if you've paid for college, the Saver's Credit if you've contributed to retirement accounts, and potentially the Child Tax Credit if you have kids. Most tax software will automatically check your eligibility for credits as you go through the filing process. You just answer questions about your situation, and it determines what you qualify for. That's why I recommend software for beginners - it does the heavy lifting of figuring out which credits apply to you.

Do you think that's better than using tax software for a first-timer? I'm worried I'll get totally lost in the forms without guidance.

Thanks so much for sharing your experience! Did you have to calculate the premium amount yourself or did MetLife provide that information on the 1099-R? I'm trying to figure out how I'd even know my total premium payments since I don't have all my old statements.

MetLife provided both the gross distribution amount and the taxable amount right on the 1099-R form. Box the total cash value I received, and Box 2a showed only the taxable portion ($600 in my case). If Allstate doesn't calculate it for you, you might need to request a policy summary showing your total premium payments over the life of the policy. They should be able to provide that information since they need it for their own tax reporting.

I surrendered it completely. I canceled my Allstate whole life policy and switched to a term policy with a different company. They sent me a check for the full cash value that had accumulated.

Just to add to this conversation - surrendering the policy completely (like OP did) vs. taking a loan against the cash value have different tax implications. Surrendering means you'll potentially pay tax on gains, while loans generally aren't taxable events (though they reduce your death benefit until repaid).