I hadn't considered that approach! Her tuition for spring was around $15,000 plus I covered about $8,000 in housing and other expenses through May. Her job pays about $60,000 annually, so she'll make roughly $35,000 for the 7 months she works this year. Would the tuition I paid count toward the support calculation?

Yes, the tuition you paid absolutely counts as support! The IRS considers support to include tuition, fees, books, supplies, and room and board. So the $15,000 tuition plus the $8,000 in housing and other expenses means you provided $23,000 in support. For your daughter's income, it's not just what she earns but what she actually spends on support items. If she makes $35,000 but saves some of it or spends on non-support items like retirement contributions or entertainment, that doesn't all count as self-support. You'd need to calculate what she actually spends on housing, food, medical expenses, etc. after graduation.

This is such a good point! My son graduated last year and his tax liability for his first half-year of work was only about $3,000, so he couldn't use the full LLC amount. Would have been better if I could have claimed it since I was in a higher tax bracket.

How often should HNW clients have their tax strategy reviewed? Is it something that needs adjustment every year or is a good strategy supposed to last for several years? And does having multiple properties across different states complicate things significantly?

Tax strategies should be reviewed quarterly at minimum, with a comprehensive overhaul annually. Tax laws change frequently, and as a portfolio grows, different strategies become available. What works for 3-4 properties often becomes suboptimal at 10-12 properties. Multi-state portfolios absolutely complicate matters and often require state-specific expertise. Each state has different tax treatments for out-of-state owners, and some entity structures that work well in one state can create unnecessary tax burdens in others. This is especially true with states like California, New York, and Texas, which have very different approaches to taxation.

DSTs have serious downsides though. You lose operational control, returns are often lower than direct ownership, and the fees can be substantial. Plus, you're locked in for the duration with very limited liquidity. They're not always the best choice for active investors who want to grow their portfolio.

Is 30% really enough? I've been setting aside 35% and still ended up owing more last year.

It really depends on your income level, state taxes, and available deductions. For many people, 30% is a good starting point, but if you're in a high-tax state or making over $100k, you might need to set aside more like 35-40%. If you found 35% wasn't enough last year, try bumping it up to 38-40%. It's always better to end up with a small refund than to owe more than you expected. Also make sure you're maximizing your business deductions - things like home office, business mileage, health insurance premiums, and retirement contributions can significantly reduce your taxable income.

Thanks for mentioning this! Do you know what qualifies as "financial hardship" for an Offer in Compromise? With my house repairs and existing debt, I'm definitely struggling financially, but I do still have income coming in.

The IRS looks at your assets, income, expenses, and ability to pay both now and in the future. There's no specific income threshold - instead, they calculate something called your "reasonable collection potential." In your case, having necessary home repairs (especially structural ones) and existing debt would be factors in your favor, but they'd also look at your ongoing income potential. The fact that you're actively working and earning would make an OIC harder to qualify for, but not impossible. The IRS has a pre-qualifier tool on their website that can give you a rough idea if you might qualify. But honestly, for most people with ongoing income, a payment plan is the more realistic option. The retirement account suggestion would be more helpful for reducing next year's taxes rather than dealing with what you currently owe.

Do you need a separate bank account too? Or can you just use your personal account as long as you keep good records?

You don't absolutely need a separate bank account from a legal standpoint if you're a sole proprietor, but I highly recommend it. Having a dedicated business account makes it so much easier to track income and expenses cleanly, and it looks more professional when clients pay you. If you ever get audited, having separate accounts makes it much easier to prove which transactions were business-related. It's also helpful for calculating your actual profit each month. Most banks offer free or low-cost business checking accounts for small businesses, so there's really no downside to setting one up.

I've used it for 2 years for my web development side gig. Honestly it's been worth every penny. It automatically categorizes expenses, tracks mileage if you need that, and separates business from personal transactions. The best part is at tax time - it generates all the reports you need and transfers everything to TurboTax if you use that.

That's an interesting approach I hadn't thought about. How would we structure the ownership in that case? Would we need to form an LLC or something similar to make it official?

You don't necessarily need an LLC, though many investors do use them for liability protection. You could simply have both names on the deed with specified ownership percentages (like 50/50 or whatever split makes sense based on your contributions). The simplest approach would be to use what's called "tenants in common" ownership, which allows for different ownership percentages and doesn't have right of survivorship (meaning if something happens to one owner, their share goes to their heirs, not the other owner). When you're ready to buy him out after the refi, you'd execute a deed transferring his ownership percentage to you, which is a fairly straightforward process.

That's not entirely accurate. While the annual gift exclusion is $18,000 per person, your solution still requires filing a gift tax return (Form 709) for the amounts over $18,000 to each person. The dad would need to report $49,500 to each person as taxable gifts ($67,500 - $18,000 = $49,500). While you're right that this likely won't result in actual gift tax being paid due to the lifetime exemption, it's still additional paperwork and reduces the lifetime exemption amount. The loan approach with proper documentation is cleaner if they truly intend to pay the money back.