Just wanted to share another perspective on this - I made the same mistake when I first started my business thinking I could deduct gift card purchases immediately. The IRS audited me two years later and made it very clear that gift cards are treated like cash advances, not business expenses until actually used. What saved me was keeping meticulous records of exactly what I purchased with each gift card and when. I had a simple spreadsheet with columns for: gift card purchase date, amount, vendor, actual use date, what was purchased, and business purpose. This made it easy to match up the gift card purchases with the legitimate business expenses when they actually occurred. One tip that helped me - when you do use the gift cards, take photos of both the gift card transaction AND the items you're purchasing. This creates a clear paper trail showing the business purpose of each expense. My accountant said this level of documentation is exactly what you need if the IRS ever has questions about your deductions.

Great advice from everyone here! As someone who went through a similar situation with my first business credit card bonus, I want to emphasize one thing that really helped me: create a dedicated folder (physical or digital) specifically for gift card documentation. When I bought gift cards, I immediately scanned the receipt and noted the date, amount, and intended business use. Then when I actually used each card, I'd scan that receipt too and file it in the same folder with a note linking it back to the original gift card purchase. This made tax prep SO much easier because everything was connected. Also, don't forget that some business credit cards actually code certain gift card purchases differently than others. My Chase Ink card didn't give me points for Visa/Mastercard gift cards, but it did for store-specific ones like Home Depot or Amazon. Just something to keep in mind if you're trying to maximize both the signup bonus and ongoing rewards! One last tip - if you're buying a lot of gift cards at once, consider spreading the purchases across a few days rather than doing it all in one transaction. It looks more natural from a bookkeeping perspective and avoids any potential red flags if you ever get audited.

Has your husband asked his school about emergency loans or payment plans? Many law schools have emergency funds or can defer some costs that might reduce how much you need to pull from retirement. Also look into Grad PLUS loans which can cover living expenses, not just tuition. Might be better long-term than raiding retirement.

Just want to emphasize what others have said about the Traditional IRA rollover approach - this is likely your best bet. When your husband leaves his job, he can roll the 401k into a Traditional IRA, then withdraw for qualified higher education expenses (tuition, fees, books, supplies) without the 10% penalty, though you'll still owe income tax. One important detail: make sure to keep detailed records of all education expenses you're using the withdrawal for. The IRS can ask for documentation, and you want receipts showing the expenses were for qualified items. Room and board don't qualify for the education exception, but tuition and required books/supplies do. For the medical debt portion, if your unreimbursed medical expenses exceed 7.5% of your adjusted gross income, that portion can also avoid the 10% penalty. You'll need good documentation for this too. The timing works in your favor since he's starting school soon - you can coordinate the withdrawal timing with when you actually incur the education expenses.

This is such a timely question! I just went through something similar with some valuable CS2 (formerly CSGO) items I'd been holding. After doing extensive research and consulting with my tax preparer, here's what I learned: Virtual game items like knives are indeed treated as capital assets, not collectibles, so you'll benefit from long-term capital gains rates since you've held yours for 3+ years. The IRS doesn't have specific guidance on gaming items yet, but they fall under the broader digital asset framework. A few practical tips from my experience: - Screenshot your Steam purchase history NOW while you still have access to those old records - If you bought it through the Steam Community Market, Steam wallet transactions should show the original purchase - Keep records of any fees from whatever platform you use to sell (Steam Market, third-party sites, etc.) - Consider the timing of your sale for tax year planning One thing that surprised me was that the actual sale platform matters for documentation. Steam Market keeps better records than some third-party sites, but third-party sites often offer better prices. Just make sure you can document everything properly. The $470+ gain you're looking at definitely makes it worth doing this right. Good luck with the sale!

I've been following this discussion closely since I'm in a similar situation with some valuable CS items. Based on everything shared here, it seems pretty clear that CSGO knives fall under capital assets rather than collectibles, which is great news for the tax treatment. One thing I haven't seen mentioned yet is the potential impact of the recent changes to 1099-K reporting thresholds. Starting in 2023, the threshold dropped from $20,000 to $600 for payment processors, though enforcement has been delayed. This means if you sell through certain third-party platforms that use PayPal, Venmo, or other payment processors, you might receive a 1099-K even for smaller transactions. This doesn't change the tax treatment (still capital gains), but it does mean the IRS will have a record of your transaction, so proper reporting becomes even more important. Make sure whatever selling method you choose, you're prepared to substantiate your cost basis if questioned. Also, given the volatility in the CS skin market, you might want to consider timing your sale strategically. If you think the market might continue climbing, holding longer doesn't change your long-term capital gains status (you're already past the 1-year mark), but if you think prices might drop, selling sooner could maximize your gain.

Based on all these real audit experiences shared here, I wanted to add some perspective from the technology side of things. I work in fintech and can confirm that payment apps like Zelle, Venmo, and Cash App are indeed integrated with the banking system in ways that make transactions visible during audits. What many people don't realize is that Zelle transactions actually go directly through your bank - they're not separate like some other payment apps. This means they show up on your regular bank statements with identifying information, making them just as visible as any other deposit or withdrawal to IRS auditors. The key point everyone's been making about documentation is spot-on. The IRS isn't necessarily trying to "catch" people using payment apps to hide income - they're looking for patterns of unreported income from ANY source. Payment apps just happen to be an increasingly common source that many people handle casually without proper record-keeping. For anyone worried about this: start documenting everything now, separate business and personal transactions, and remember that the goal is simply to be able to explain and justify your deposits if asked. The technology isn't working against you - lack of organization is the real risk factor.

This entire discussion has been incredibly eye-opening and honestly a bit of a wake-up call for me. I've been freelancing as a web developer for about 3 years now and receiving probably 60-70% of my payments through Zelle because clients find it convenient. I always report the income correctly on my taxes, but my record-keeping has been absolutely terrible - just a mess of mixed personal and business transactions with barely any documentation. What really struck me from reading everyone's actual audit experiences is that it's not about the IRS "coming after" people using payment apps, but rather that these transactions are just part of the normal paper trail they examine during any audit. The fact that Zelle goes directly through your bank (thanks for that insight, Hiroshi!) means there's really no hiding these transactions anyway. I'm definitely implementing several of the suggestions here immediately: opening a dedicated business account, creating that transaction tracking spreadsheet retroactively for this year, and starting to screenshot payment memos. The peace of mind alone will be worth the effort. One thing I'm still wondering about - for those who've been audited, did the agents ever comment on or seem more suspicious of businesses that received a high percentage of payments through apps versus traditional methods like checks or wire transfers? Or do they really treat all deposit sources equally as long as they're properly documented and reported?

For anyone dealing with inherited rental property and passive loss rules, I'd highly recommend getting familiar with Form 8582 (Passive Activity Loss Limitations) - this is where you'll actually report your rental losses and apply the active participation exception. The form can be tricky, especially when you're dealing with large depreciation amounts from stepped-up basis property. A few additional considerations that might help: if you're married filing jointly, the $25,000 active participation allowance applies to your combined income, not per spouse. Also, if you have multiple rental properties, the active participation rules apply differently - you need to actively participate in each property to use losses from that specific property. One strategy some people overlook is the timing of other income. If you have control over when you realize capital gains (like selling stocks), you might consider timing those gains strategically to stay below the MAGI thresholds for the passive loss exceptions. Just make sure any timing strategies make sense from an overall financial planning perspective, not just taxes. The documentation everyone's mentioned is crucial - I keep a simple spreadsheet tracking time spent on rental activities, decisions made, and communications with tenants/contractors. Takes just a few minutes each month but provides great audit protection.

Just wanted to chime in as someone who's been managing inherited rental properties for several years. The passive loss rules can definitely be confusing, but you're on the right track with the active participation exception. One thing I'd add to all the great advice here - make sure you understand how the depreciation recapture will work when you eventually sell the property. With such a high stepped-up basis and substantial annual depreciation, you'll be recapturing potentially hundreds of thousands in depreciation at a 25% rate when you sell, even if the property appreciates. This doesn't mean you shouldn't take the depreciation (you should!), but it's worth factoring into your long-term planning. Also, consider whether you might benefit from a 1031 like-kind exchange when you eventually sell. This can defer both the capital gains and depreciation recapture taxes if you reinvest in another rental property. With your property value, this strategy could save you significant taxes down the road. The $25,000 active participation allowance is definitely your best immediate option given your situation, but don't forget to think about the bigger picture tax planning too!