Thank you for the detailed steps! Did you have to do anything special for the state tax portion or was it pretty straightforward once you figured out the federal part?

The state part was actually pretty simple once I figured out the federal portion. I just entered the state withholding amount from my 1042-S in the state withholding section along with my W-2 state withholding. For the income, I reported it the same way on my state return as I did on my federal. FreeTaxUSA walks you through the state portion after you complete the federal section, and the state return automatically imports most of the information from your federal return. Just make sure to double-check that all the withholding amounts are correct before submitting.

This is incorrect advice. As a resident alien, you generally CANNOT claim tax treaty benefits. Those are mostly for nonresident aliens only. Once you become a resident for tax purposes, you lose most treaty benefits except for very specific exceptions.

You're right, I should have been more clear. Most tax treaty benefits are for nonresident aliens, but there are some specific provisions that continue to apply even after you become a resident alien. It depends entirely on the specific treaty and the specific type of income. For example, the US-China treaty has provisions for students that can continue for a limited time even after becoming a resident alien. But you're correct that in most cases, becoming a resident alien means losing treaty benefits.

That's a really good point I hadn't thought about! My mom and I have different tax preparers, and I don't think she itemizes deductions anyway since she takes the standard deduction. But I'll definitely check with her to make sure there's no double-claiming happening. Would it be sufficient if she just signs something stating she's not claiming the interest, or do we need something more official?

Having her sign a statement that she's not claiming the deduction would be good documentation to keep with your records. It doesn't need to be notarized or anything super formal - just something that shows you both understand the situation. The most important thing is making sure she doesn't claim it on her return. If the IRS sees the same mortgage interest claimed on two different returns, it will almost certainly trigger a review. Since the 1098 has her SSN on it, the IRS computers automatically expect that deduction to appear on her return, not yours. That's why the explanatory statement with your return is so important - it tells the IRS why you're claiming a deduction that's linked to someone else's SSN.

That's actually a good question but doesn't apply in this case. Since both the mother and child are on the deed (both have ownership interest), the payments aren't considered gifts - they're considered payments toward the child's own property interest. If the child wasn't on the deed but was making payments, then yes, those could potentially be considered gifts to the mother. But with joint ownership, each payment is partially for the child's own benefit. The mortgage interest deduction follows who made the payment AND has legal ownership, not necessarily who is on the loan.

Does it matter that her state return was already accepted with the married name? Won't that cause problems when the federal return has a different last name?

States operate their own tax systems separate from the federal IRS system, which is why one might accept a return while the other rejects it. Some states don't verify against the SSA database as rigorously or might batch their verification processes. Having different names on your federal and state returns isn't ideal but it's not catastrophic. When you file with your maiden name federally, include a brief statement explaining the situation with your state return. The key issue is ensuring your tax ID numbers (SSN) match on both returns. Most tax agencies understand that name changes happen and have procedures to handle these timing mismatches.

Thank you so much for sharing your experience! I was worried I was the only one dealing with this. I'll go ahead and refile with my maiden name tonight. Did you have any issues with your state return? Mine was already accepted with my married name.

My state return actually got rejected too, but I'm in Texas so we don't have state income tax - it was just for my property tax stuff. I had to fix that one separately. If your state return already went through with your married name, you might want to call your state tax agency and ask them what to do. Some states are more laid back about the name matching than the IRS is. The important thing is that your social security number is consistent on both returns!

Would it be worth filing an amended return? Or is the IRS calculation definitely correct here? We're talking about thousands of dollars difference!

If the IRS followed the correct ordering of credits according to tax law, filing an amended return wouldn't change the outcome. The order of application is established in the tax code, and the IRS systems are programmed to follow that sequence. What I would recommend instead is planning for next year to maximize your use of the adoption credit. Since you can carry it forward for up to 5 years, you might be able to adjust your withholding or make other tax planning moves to ensure you have enough tax liability next year to absorb more of the adoption credit. The credit isn't lost - it's just delayed in providing you benefit.

We got a notice but it was super vague - just said our refund was reduced with a different amount but didn't explain the calculation. Called IRS and they basically just confirmed what I already knew - they applied CTC then ACTC then said no tax liability left for adoption credit. But they wouldn't explain WHY they did it in that order when it seems wrong. Can adoption credits be used against self-employment tax? We both have some 1099 income along with our W2 jobs.

The adoption credit cannot be used against self-employment tax - that's a key limitation that sometimes causes confusion. It can only offset your income tax liability, not the SE tax portion. If you have self-employment income and paid SE tax, that might explain part of the discrepancy. The adoption credit can't touch that portion of your tax bill. What might have happened is that after applying the CTC against your income tax liability (not SE tax), there wasn't enough regular income tax liability left for the adoption credit to offset. The good news is that the unused adoption credit doesn't expire this year - you can carry it forward for up to 5 years on future returns.

Does this work with the free version of TurboTax or only the premium versions? And can you use this feature before you're actually ready to file?

You need TurboTax Premier or above for the investment features - the free version doesn't support capital gains calculations. And yes, you can absolutely use this feature any time during the year before you're ready to file. I typically start a new tax file at the beginning of each year just for planning purposes. The tax planning tools are available year-round, not just during tax season. You can run different scenarios like "what if I sell these stocks at a loss?" to see the impact on your tax situation. It's been super helpful for making strategic decisions throughout the year rather than just discovering surprises at tax time.

Not everyone can afford an accountant, especially if they're just casual investors. I tried getting a consultation with a CPA and they wanted $250/hour just to discuss my tax situation. These online tools seem way more cost effective for most people.