Does your accountant take into consideration things like health insurance, Social Security survivor benefits, inheritance laws, etc? The tax piece is just one part of the financial picture of marriage. Curious how those other factors weighed in.

Yes, we did a comprehensive analysis. For our specific situation (both have good employer health insurance, substantial retirement savings, and have proper estate planning with attorneys), the tax penalty outweighed other benefits by a significant margin. We're fortunate to be in a state that has strong domestic partnership protections. We don't have children and have advanced healthcare directives in place. It's definitely not a one-size-fits-all decision, but the tax impact was too substantial for us to ignore.

This is an excellent point that many people miss. When you combine incomes but have the same deductions, those deductions have less "power" to reduce your overall tax liability.

Are those still deductible? I thought the Tax Cuts and Jobs Act eliminated unreimbursed partnership expense deductions? My accountant told me they're not deductible anymore for 2023 taxes.

You're mixing up two different things. The TCJA eliminated unreimbursed employee business expenses (that used to be on Schedule A), but unreimbursed partnership expenses reported on K-1 are still deductible. If you're a partner and you pay for business expenses out of pocket (without being reimbursed), these expenses can still be deducted on your Schedule E. The key is that they must be properly reported on your K-1 in box 13 with code W. This is different from employee expenses - it's because as a partner, you're not an employee of the partnership.

Could you explain more about why a negative amount creates a taxable gain? I think mine shows negative but I didn't report anything extra and now I'm worried.

That's an interesting suggestion! I hadn't considered the contractor route. Do you have any issues with getting paid? Like do you have to deal with currency conversion fees or international wire transfers?

I use Wise (formerly TransferWise) for payments, and it's been great. The fees are much lower than bank wire transfers, and you get very close to the actual exchange rate. Most of my foreign clients are happy to use it since it saves them money too. You'll want to keep records of the exchange rates for tax purposes though. I track each payment in both the foreign currency and USD equivalent on the date of payment, which makes tax time much easier. Some clients pay me in USD directly, which simplifies things even further if your German company is willing to do that.

This is so true. I work for a UK company while living in California, and California doesn't fully recognize the same tax treaties as the federal government. Ended up having to pay more to California even though I was protected from double taxation at the federal level.

Thanks for pointing this out! I'm in Texas which doesn't have state income tax, so I guess that's one less thing to worry about at least!

I actually asked about that last year, but my company said they can't do it because of how they control my schedule and work processes. Something about the IRS having specific tests for who qualifies as an independent contractor vs. employee. They also mentioned it would mean losing my benefits like health insurance and 401k matching.

That makes sense. The classification rules are pretty strict and the IRS looks at factors like behavioral control, financial control, and relationship factors. If the company controls when and how you work, provides tools/equipment, offers benefits, etc., they're probably correct that you should be classified as an employee. Be careful pushing for 1099 status just for tax deductions - if misclassified, it could create bigger headaches down the road for both you and the employer. The accountable plan route others suggested is probably your best option at this point.

This is what I did too. My company was resistant to dealing with expense reports, so they just increased my commission structure. Just make sure you do the math first - calculate what your annual mileage reimbursement would actually be (miles × IRS rate) and make sure the commission increase at least covers that amount.

1 That's a really good point I hadn't considered. If I amend 2021 to show the losses, would any unused losses potentially carry forward to the 2022 return? I'm trying to figure out the right sequence here.

3 Yes, exactly. Any disallowed passive losses from 2021 (amounts that exceed what you're allowed to deduct due to the income limitations) would carry forward to 2022. So first figure out your 2021 situation - how much loss you can actually claim after the Form 8582 calculations, then carry any remaining disallowed losses to 2022. Even if you can't deduct all the losses in either year due to the $150K phaseout, having them properly documented and carried forward is important because you can eventually claim them when you dispose of the property. That's why doing them in the right order matters.

10 I used TaxAct for a similar amendment last year. It was decent with Schedule E but the Form 8582 calculations were confusing. Had to basically understand the form myself to make sure it was done right. Not super user-friendly for rental property amendments.