Don't forget student loan interest! That can be a significant deduction for many people making around $65k and can result in very different refund amounts between otherwise similar tax situations.

That's a great point! Student loan interest deductions can reduce taxable income by up to $2,500 in 2024, which could easily account for several hundred dollars in tax differences. Other factors I didn't mention that could cause refund differences include charitable donations if someone itemizes, medical expenses over 7.5% of AGI, and whether someone qualifies for education credits like the Lifetime Learning Credit or American Opportunity Credit.

I did this last year and it backfired. Updated my W-4 to get more in each check but didn't calculate correctly. Ended up owing $800 at tax time which I wasn't prepared for. If you're going to adjust, use the IRS withholding calculator on their website to be precise. Don't just guess like I did.

What if they don't know what the fair market value was when they started renting it? Is there a way to figure that out after the fact? My property was inherited so I have no idea what it was worth when I started renting it out 8 years ago.

You can establish the fair market value retroactively. One approach is to look at comparable sales in the same neighborhood around that time period. Real estate websites sometimes have historical data, or you could ask a realtor to help with a retroactive market analysis. You could also check property tax assessments from that year, though these are often lower than actual market values. Typically you'd take the assessed value and apply a multiplier based on your county's assessment ratio. Another option is to get a professional retroactive appraisal. Some appraisers specialize in this. It costs money but provides good documentation if you're ever audited.

How did you calculate the land value portion? That's the part I'm stuck on with my rental. I know you can't depreciate the land, but I'm not sure how to determine what percentage is land vs building.

Have you had any issues with FreeTaxUSA? I've used TurboTax for years and I'm nervous about changing. Does it import previous returns or do you have to start from scratch?

I've used it for two years now with no issues. Their interface isn't quite as polished as TurboTax, but it gets the job done perfectly fine. You can't directly import a TurboTax return, but you can use your previous year's PDF to reference information. The learning curve is minimal - takes maybe an extra 15 minutes your first time, but you save $40-90 compared to TurboTax. Their customer service was also surprisingly responsive when I had questions about reporting multiple interest accounts on Schedule B.

Thanks for posting this! Is Cash App Taxes actually reliable though? I'm always worried about these free services having hidden catches or missing something important.

Do you know if these tax clinics are available year-round or just during tax season? I never thought about checking with universities.

Many of the university tax clinics do operate year-round specifically for amendments and other non-filing season issues, but with reduced hours. At my local university, they run the full clinic during tax season (Jan-Apr) and then have limited hours (usually one day per week) during the off-season. The best approach is to call the business or accounting department of nearby colleges and ask if they have a VITA program or tax assistance clinic. Community colleges sometimes offer these services too, not just four-year universities. Some will even help with state amendments which can be trickier than federal ones.

The transcript tool is super helpful, but I had trouble verifying my identity when creating an account. They kept rejecting my phone number for some reason. Did you have any issues with the verification process?

What about the prior year loss issue? If they reclassify prior years, won't that potentially create passive loss limitations that weren't applied before? Could that actually hurt the partners if they didn't have other passive income in those years?

You raise a valid concern. Reclassifying prior year income/losses from ordinary to rental could trigger passive activity loss limitations that weren't previously applied. If the partners didn't have sufficient passive income from other sources, some losses that were previously deducted might be suspended. This requires a careful analysis of the partners' entire tax situation for those years. The self-rental rule might actually help here - if the rental partnership leases to a business in which the partners materially participate, the rental income might be treated as nonpassive under the self-rental recharacterization rules, which could allow the losses to remain deductible. It's definitely worth running the numbers both ways before amending.

You absolutely need to separate those activities. The rental portion should be reported separately from the operating business. There are several ways to handle this, but the simplest is probably to report the business operations on page 1 and the rental activity on Schedule K and the appropriate rental real estate income lines. This ensures the rental income isn't subject to SE tax.