That's really helpful! We might be in that higher AGI category because of the stock sale. So does that mean we'd need to withhold 110% of last year's tax (including the unexpected $9,300) to be safe? And that withholding tip is brilliant - I had no idea the IRS treats withholding as if it happened evenly!

Yes, if your AGI was over $150,000 last year, you'd need to cover 110% of your total tax liability (including that $9,300) to guarantee no underpayment penalty. But that's only if you're using the "prior year tax" safe harbor method. The withholding strategy is a great safety net. Unlike estimated payments which must be made quarterly in the correct amounts, the IRS treats withholding as if it occurred evenly throughout the year regardless of when it actually happened. So increasing your withholding in November/December can retroactively cover your requirements for the entire year. It's a completely legitimate way to avoid penalties if you realize late in the year that you might come up short.

ESPP sales are actually a bit complicated. Companies usually withhold some taxes, but often only at a flat 22% rate for federal (regardless of your tax bracket). If you're in a higher tax bracket, that withholding might not be enough. Also, depending on if it's a qualifying or non-qualifying disposition, the tax treatment differs. Some of the gain might be taxed as ordinary income rather than capital gains.

You're right about the gift tax exclusion, but I think OP's main concern was trying to avoid paying income tax on the portions given away, not about gift tax. Unfortunately, there's no way around paying income tax on the full amount since it was legally their income before they chose to give it away.

Oh good point, I misunderstood the original question then. Yeah, that's unfortunate but makes sense from a tax perspective - can't give away income to avoid the taxes on it. Thanks for clarifying!

That's good to know about the household expenses! For my situation, I do pay the mortgage, utilities, and other household costs for my home. If I can establish that one of my college kids considers my home their main residence when not at school, would I meet that requirement even if they physically spend more time at college and with their mom during breaks?

Yes, you would likely meet the requirement. The IRS looks at whether you pay more than half the cost of maintaining the home where your qualifying person lives. Since college dorms and temporary stays during breaks are considered temporary absences, what matters is that you maintain their primary home. As long as your college student considers your home their main residence when not at school, and you pay more than half the costs of maintaining that home, you should meet the requirement. I'd recommend keeping documentation to substantiate this - things like their permanent address on school records, driver's license, voter registration, and where they receive mail.

I had the same issue with TurboTax. I found that if you go back to the "Personal Info" section and manually select "Head of Household" instead of letting it calculate automatically, then proceed through the qualifying person questions again, it will stick. Sometimes the software doesn't correctly handle these college student temporary absence situations.

We're actually not in a disaster area, this was just a regular plumbing leak that went undetected for a while. Insurance did cover about $2,000 of it, but we had a high deductible and they wouldn't cover the countertop replacement since they said it was an "upgrade" from what we had before. I'll definitely keep all receipts though!

That's important information about the insurance - you can only deduct expenses you actually paid out of pocket, not what insurance reimbursed. So you'd need to subtract that $2,000 from any potential deduction. Since you're not in a declared disaster area, casualty loss probably won't work. Your best bet might be documenting how the mold affected your office space specifically and trying for a partial business deduction. But honestly, for this amount and situation, getting professional advice (either through an IRS agent or tax professional) would be worth the investment to avoid potential audit headaches.

Good point! From what OP described, this sounds more like a capital improvement than a repair, especially the new countertops. Repairs restore something to its previous condition, while improvements add value or extend useful life.

Careful with the home office deduction! I thought I could claim this too, but my accountant said if you're a W-2 employee (not self-employed), you can't take the home office deduction anymore after the 2017 tax law changes. Only applies if you're self-employed now.

You're absolutely right, and I should have been clearer. The home office deduction is only available if you're self-employed, an independent contractor, or gig worker. W-2 employees can't claim it anymore even if you work from home all the time. This was changed with the Tax Cuts and Jobs Act back in 2017. I'm self-employed so I still get to take advantage of it, but I shouldn't have assumed everyone's situation was the same. Thanks for the correction!

How do you know if they're separated correctly? My 1098 has a box for mortgage interest and another box for property taxes. Is that what you mean?