Thanks for this explanation! This makes so much more sense now. So even though my Airbnb isn't a "rental activity" under passive activity rules, I still report it in Box 2 because it's physically real estate. Does this mean I might be limited in how I can use the losses though? Our partnership is showing about $13,500 in losses this year.

Yes, you've got it exactly right - Box 2 is for the real estate itself regardless of how it's classified under passive activity rules. Regarding your losses, that's where the Pub 925 classification becomes important. Since short-term rentals (average stay <7 days) are considered "nonrental activities," you'll need to determine if you materially participate in the business. If you do materially participate (like managing bookings, coordinating cleanings, etc.), then the losses are nonpassive and can offset your other income like wages. If you don't materially participate, then the losses are passive and can only offset passive income.

I had this exact problem with TurboTax last year. You need to go into the income section, then after entering the rental income/expenses, there should be a question about average rental period. Make sure you select "7 days or less" if that applies to your Airbnb. TurboTax should then reclassify it properly. The income still shows in Box 2, but it gets the proper treatment for passive activity purposes.

Oh god, I hadn't even thought about that! Is the self-employment tax calculated on the gross 1099 income or after deductions? And what's the estimated tax penalty usually amount to?

Self-employment tax is calculated on your net profit after deductions (thankfully). So all those business expenses will reduce both your income tax and SE tax. That's why maximizing legitimate deductions is so crucial for 1099 workers. The estimated tax penalty varies based on how much you should have paid quarterly and current interest rates. It's basically an interest charge for not making timely payments throughout the year. It won't be your biggest concern compared to the failure-to-file and failure-to-pay penalties, but it's another thing that adds up. Form 2210 calculates this penalty, and sometimes you can get it waived if you have a reasonable cause, but after 5 years that might be difficult.

This is actually super important. If the IRS has already sent notices of deficiency or started collections, the approach is completely different than voluntary disclosure.

3 Really? I tried TaxAct last year and they locked me out of seeing my final numbers until I paid. Has this changed for 2025?

11 I think you might be confusing it with TurboTax, which definitely pulls that bait-and-switch stuff. TaxAct shows you the estimated refund/amount due throughout the process on their summary dashboard. I've been using it for years just for checking purposes. Maybe it depends on how complex your taxes are? I have pretty straightforward W-2 income with some basic deductions and investments, so I'm always able to see my estimated refund before the payment screen.

8 Great suggestion! I actually did this last year. Found a $850 difference between the two calculations, which led me to discover an error in how my preparer handled my crypto transactions.

2 Exactly! That's the real benefit - when two completely different systems give you the same number, you can be much more confident than just trusting one service. And Cash App Taxes is completely free for both federal and state, no upsells or hidden fees.

I didn't even think about the Head of Household status! Does that make a big difference in the tax calculation? And would I still qualify for that even if I end up letting her claim our daughter as a dependent this year?

Yes, Head of Household status makes a significant difference! For 2024 taxes (filed in 2025), the standard deduction for HOH is $21,900 versus just $14,600 for Single filing status. That's a $7,300 difference in taxable income right off the bat, which could save you thousands depending on your tax bracket. You can still qualify for Head of Household even if you let your ex claim your daughter as a dependent, as long as your daughter lives with you more than half the year and you pay more than half the cost of maintaining the home. The dependent exemption and Head of Household status are separate benefits.

Does that alternating years agreement need to be part of the formal custody arrangement, or can it just be a separate signed document between the two parents?

Do you need a minimum amount to open a DAF? I always thought those were just for rich people donating tens of thousands of dollars.

The minimums are actually pretty reasonable now! Fidelity and Schwab both allow you to open a donor-advised fund with just $5,000 initial contribution. Vanguard's minimum is higher at $25,000. Once established, you can make additional contributions of as little as $500. These definitely aren't just for wealthy people anymore. I'm solidly middle class and find it incredibly useful, especially for simplifying stock donations. It's also nice because you can contribute when it makes tax sense for you, but take your time deciding which charities to support. I make one stock transfer per year to my DAF (getting tax benefits immediately) but then make grants to 10-15 different organizations throughout the year.

I've used Benevity through my employer and it's super convenient. The big advantage is that my company matches the donation, which they won't do if I donate outside their system. The downside is they limit which stocks you can donate - they wouldn't let me donate some of my smaller cap stocks. Also, just be aware the processing time was longer than expected - about 2 weeks from when I initiated it to when the charity received it.

Thanks for sharing your experience! I hadn't considered the matching aspect - that's definitely a huge advantage if they'll match stock donations. I'll check if there are any stock restrictions in our version of the platform. The two-week processing time is good to know. I'll make sure to plan ahead, especially for year-end donations. Seems worth the extra wait to get the company match though!