I used TurboTax last year for this exact scenario. It correctly handled the state portion when I entered the 1099-R information. The software asked if the distribution was reported to my state, and I selected "yes" even though box 16 was blank. It then properly reported it on my state return without taxing the after-tax portion. Just make sure your 8606 history is accurate in the software too.

Thanks for the advice! Would using Form 8829 as a guide potentially raise red flags with the IRS since it's technically for business use rather than rental property? And do you know if there's a specific depreciation schedule I should be using for residential rental property?

I wouldn't use Form 8829 itself, just the methodology as a reference point. For rental properties, you'll be recording everything on Schedule E. The depreciation schedule for residential rental property is 27.5 years using the straight-line method. You'll report this on Form 4562. If this is your first year renting the property, you'll need to establish the "basis" of the property (usually what you paid for it, plus certain closing costs and improvements, minus the value of the land). Then you'll apply your rental percentage to that basis to determine the depreciable amount, and divide by 27.5 years to get your annual depreciation deduction.

I switched to FreeTaxUSA last year and found it much better for rental properties. It asks clearer questions about partial rentals and walks you through the depreciation calculations step by step. Plus it's a lot cheaper than TurboTax.

Thanks for the recommendation! I'll definitely check that out. TurboTax has been so frustrating with this rental stuff that I was considering paying an accountant just for this part of my taxes.

12 How do you get a Verification of Non-filing Letter though? Doesn't that also require contacting the IRS?

3 You can request a Verification of Non-filing Letter by using IRS Form 4506-T. Mark box 7 on the form to request the verification of non-filing, and you can either mail it in or fax it to the IRS. Some schools will also accept a signed statement certifying that you didn't file and weren't required to file, especially if you had no income that year. Every financial aid office handles these situations a bit differently, which is why it's important to speak directly with your school's aid counselors. They deal with these situations regularly and often have school-specific procedures that can save you time.

23 I used FreeTaxUSA for a 2020 return I had to file late. It was only like $15 for the federal return (state was another fee). The interface is less polished than TurboTax but it gets the job done and asks all the same questions. They keep prior year returns available which is nice.

Wait, I thought the Tax Cuts and Jobs Act eliminated unreimbursed employee business expenses completely for 2018-2025? Aren't we unable to claim those right now?

You're absolutely right, and I apologize for the misinformation. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the 2% floor (including unreimbursed employee business expenses) for tax years 2018 through 2025. That's a really important correction - so currently the work-related education expenses would only be deductible if you're self-employed or if your employer reimburses you through an accountable plan. For employees paying out of pocket, the options are much more limited now until those provisions possibly return after 2025.

The Lifetime Learning Credit phases out at higher income levels though, right? I think around $80k for singles? Might not help if OP has a good job in their field already.

What's FIFO? And how do I know which method my exchange is using? I've been using Coinbase and just downloading their tax forms.

FIFO stands for "First In, First Out" - it means when you sell crypto, the system assumes you're selling your oldest purchases first. This can result in higher taxes if your earliest purchases were at lower prices. Coinbase provides the data, but they don't actually choose your accounting method for you - that's your choice when you file your taxes. Many tax software programs default to FIFO because it's simpler, but you can usually change to specific identification method which lets you choose which specific units you're selling (like choosing to sell the ones you bought at higher prices first to minimize gains).

Yes! Exchanges are terrible with this. My Binance report was missing transactions from coins I transferred in from other wallets. You really need to track everything yourself or use dedicated crypto tax software.