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19 Another option that hasn't been mentioned is adjusting your state withholding separately. In many states, you can fill out a state-specific withholding form that's different from your federal W-4. I found out last year that even though I had my federal withholding dialed in perfectly, I was still having way too much withheld for state taxes. Check your state's tax department website - they usually have forms and calculators specifically for state withholding.
14 Oh I didn't realize state withholding was separate! Does changing your federal W-4 automatically adjust your state withholding too, or do you have to do both separately?
19 It depends on your state. In some states, your state withholding is based on your federal W-4, so changing one affects the other. But many states have their own withholding forms. For example, states like California (DE 4), New York (IT-2104), and Illinois (IL-W-4) have their own forms. Your employer's HR department should know which forms apply to your state. If you only adjust your federal withholding, you might still get a large state refund, so it's worth looking into both!
12 Careful about adjusting too much! My brother tried to get his refund to zero and ended up OWING $800 at tax time, which he wasn't prepared for. Maybe aim for a small refund of a few hundred as a cushion in case your tax situation changes during the year.
This might sound basic, but double-check that you entered ALL your info exactly the same in each program. When I was comparing, I accidentally missed entering a 1099 in one of them which threw everything off. Also check if one is calculating your state as resident for the full year while another might have you as part-year if you moved.
That's a good point! I just went back through TurboTax vs TaxAct and realized I somehow entered my student loan interest in TaxAct but completely missed that section in TurboTax. That explains part of the difference but still leaves about $400 unaccounted for. I'm going to keep digging...
Glad you found one issue! For the remaining $400 difference, check if one program is taking standard deduction while another is itemizing. Also look at any tax credits - especially things like Earned Income Credit, education credits, or child/dependent credits if applicable. Those can easily create differences of several hundred dollars.
From my experience working at a tax prep firm, software differences usually come down to how questionnaires are structured. Tax Act might ask "Do you have any education expenses?" while TurboTax might specifically ask "Did you pay tuition for college this year?" - leading to different answers.
Don't forget about depreciation! When you rent out a property, you have to take depreciation on the building portion of your property (not the land). This is a significant deduction that offsets your rental income. If you don't take it voluntarily, the IRS will assume you took it anyway when you eventually sell the property, so there's no reason not to claim it. The general rule is 27.5 years for residential rental property. So you'd divide your building value (minus land value) by 27.5 to get your annual depreciation deduction.
How do you determine the building value vs land value? My property tax statement just shows one total value.
Your property tax assessment should actually break down the value between land and improvements (building), even if the total tax is combined. Look more carefully at your tax statement for this breakdown. If it really doesn't show it, you can use a reasonable method to determine the split. Some people use the ratio that insurance companies use (since they only insure the building, not the land). Another approach is to look at comparable vacant land sales in your area to estimate land value, then subtract from your total purchase price.
Just to add something others haven't mentioned - since your property was intended to be your primary residence initially, be careful about the qualified residence interest rules if you later move into it. The rules get complicated if you convert back from rental to primary residence regarding how much of your future sale would be eligible for the principal residence exclusion ($250k/$500k). Keep VERY good records about when you converted it to rental use, what improvements you make during the rental period, and depreciation taken. You'll thank yourself later if/when you sell.
One thing nobody's mentioned yet - check with your state tax authority too! Federal Section 121 exclusion is one thing, but some states have different rules or interpretations about primary residence. In my case (WA state), I had to provide additional documentation to prove my home was still my primary residence despite being gone for 16 months. I needed copies of my voter registration, utility bills (even though they were minimal since I wasn't there), and property tax statements. The county tax assessor had initially questioned my homestead exemption because a neighbor reported my house was "abandoned" when I was traveling. What a nightmare that was to clear up!
Thanks for bringing this up! I'm in Arizona - do you know if there are any specific state rules I should look into? I've maintained all my utilities and have been paying someone to check on the house monthly and do basic maintenance.
Arizona is actually pretty reasonable with their rules from what I know. The key is that you've maintained the utilities and have someone checking on the place - that shows intention to return and ongoing maintenance of the property as a residence. Check with the Arizona Department of Revenue to be sure, but they generally follow federal guidelines for primary residence. The fact that you've been paying for maintenance is a strong indicator that you haven't abandoned the property. Just make sure you have documentation of those payments for the maintenance person as additional proof if needed.
Has anyone actually been audited on this specific issue? I'm wondering because I'm in almost the exact same situation (traveling since 2021, selling house in 2025) and I'm curious what documentation the IRS actually requested.
I went through an audit in 2022 for my 2020 taxes that included questions about my primary residence status. They asked for: - Voter registration - Driver's license - Where my vehicles were registered - Bank statements showing my address - Tax returns from previous years - Utility bills - Homeowners insurance They never asked for proof I physically occupied the house for X days. It was all about where my legal ties were established.
Danielle Mays
Don't overlook checking if your original tax return was actually correct. I thought I owed $12k in back taxes until I had a tax professional review my return. Turns out I had missed several deductions as a self-employed person. Filed an amended return and my liability dropped to around $7,500. Worth spending a few hundred bucks on a CPA review if you did your taxes yourself originally. Even if you used software, it's only as good as the info you put in.
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Roger Romero
ā¢What kind of deductions did you miss? I'm self-employed too and worried I might be overpaying.
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Danielle Mays
ā¢The biggest ones I missed were home office deductions (I was afraid of an audit so I skipped it entirely), health insurance premiums (which are deductible for self-employed people), and retirement plan contributions. I also hadn't properly calculated my business mileage. The CPA also helped me properly categorize some expenses I had lumped together as "miscellaneous" which gave me more legitimate deductions. Even things like a portion of cell phone bills and internet costs can be deductible if you use them for business.
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Anna Kerber
Has anyone considered bankruptcy as an option for tax debt? I've heard that older tax debts can sometimes be discharged.
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James Maki
ā¢Yes, but there are very specific rules. Tax debts can potentially be discharged in Chapter 7 bankruptcy if they meet ALL these conditions: - The taxes are income taxes (not payroll or fraud penalties) - The debt is at least 3 years old (from the due date) - You filed your tax return at least 2 years before filing bankruptcy - The IRS assessed the tax at least 240 days before filing bankruptcy - You didn't commit fraud or willful evasion For 2022 taxes, you wouldn't meet the 3-year rule yet, so bankruptcy wouldn't help with this specific debt until at least 2026. Also, bankruptcy has serious long-term consequences for your credit and financial future.
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