Do you think it would be worth it to just sell both cars immediately? I'm wondering if the hassle of dealing with all this tax stuff is even worth entering the contest.

Selling both cars immediately is definitely a valid strategy if you're mainly interested in the value rather than the specific cars. The tax obligation is created when you accept the prize, so selling them doesn't eliminate the taxes, but it gives you the cash to pay those taxes. Whether it's worth entering depends on your financial situation. If you have absolutely no way to pay the potential tax difference (even with payment plans), it might create more stress than it's worth. But remember - winning prizes like this can be life-changing even after taxes! Many winners sell one asset to keep the other and pay all taxes. Don't let taxes completely discourage you from opportunities if you have a plan to handle them.

Good point! I'm in Washington state and won a vacation package worth about $15k last year. No state income tax saved me almost $1,500 compared to if I lived in Oregon.

Thanks for mentioning that! I've only claimed the American Opportunity Credit for 3 years so far, so I should be eligible for one more year. And yes, I have my enrollment verification and payment receipts saved. I paid online through my student portal in December 2022, and I have the confirmation email and bank statement showing the payment date. Would those be sufficient documentation?

Those records should be perfect! Keep the enrollment verification showing you were a student during Spring 2023, along with your payment confirmation and bank statement showing the December 2022 payment date. That's exactly the documentation you'd need if there were ever questions about your eligibility. Since you've only claimed the American Opportunity Credit for 3 years, you should be eligible for one more year, which is great since it's generally more beneficial than the Lifetime Learning Credit for most undergraduates.

Did you need to send any documentation with your amended return or did you just keep it for your records? I'm in a similar situation where I need to amend my 2022 return to claim education expenses I paid in 2022 for Spring 2023 classes.

Hmm, that's a really good point. I never even thought to check that. How would I verify if they're withholding the correct state amount? Just compare my pay stub percentages to my state's tax rates?

The easiest way is to look at your last pay stub from the year and check the state withholding total. Then use your state's tax calculator (most state tax department websites have one) and enter your total income. Compare what you should owe versus what was withheld. Another approach is to check if the state code on your W-2 is correct - there should be a state code in Box 15. Make sure it matches your actual resident state. I've seen employers accidentally use the wrong state code, especially for remote workers.

This really depends on your income level though. $25 extra per check might work great for you guys but would be way too little for higher incomes and too much for lower incomes. It's not a one-size-fits-all solution.

Do you think its worth paying for a year-round tax person or just someone during tax season? My business is pretty small (only made about $12k last year on the side).

Even with a smaller side business, having access to your tax preparer throughout the year can be very valuable. You don't need someone on retainer, but you want someone who'll answer a quick email or call about estimated tax payments or potential deductions. For a business generating $12k, I'd recommend finding a preparer who offers a package deal rather than hourly billing. Many offer a single annual fee that includes your tax preparation plus reasonable access during the year for questions. This way you're not hesitating to ask important questions because you're worried about getting billed for every email.

Any tips on finding a good tax professional? I've heard horror stories about people who paid a lot but got terrible advice.

I didn't even think about losing the student loan interest deduction! Do you know how much that could impact our tax situation? We were deducting about $1,400 in student loan interest last year.

Based on the amount you were deducting, you could see an increase in your tax bill of around $308-$350 depending on your tax bracket (assuming the $1,400 deduction you mentioned). This is because the deduction reduces your taxable income - when you lose it, that amount becomes taxable again. It's still probably worth doing the family loan if the interest rate your parents are charging is lower than the original student loans. Just make sure to factor this change into your tax planning for next year so you're not surprised at tax time.

That's not always true though. The AFR rates are tiered based on loan term. For a short-term family loan (under 3 years), the AFR might be around 1.5-2% right now. For medium-term (3-9 years) slightly higher. Long-term loans have the highest rates. So they could still charge a pretty reasonable interest rate and be IRS compliant.