Thanks for pointing this out! I hadn't even thought about separating the land value. Do you know if I can just use the numbers from my property tax assessment, or should I get a separate appraisal specifically for this purpose?

Property tax assessments are generally acceptable for determining the land-to-building ratio, and that's what most people use. The assessment should break down what portion is attributed to land versus improvements (the building). If your property tax assessment seems outdated or inaccurate, you can get a separate appraisal, but it's usually not necessary. Just make sure you document whatever method you use to determine the ratio in case of an audit. Also, keep in mind that high-value properties sometimes get additional IRS scrutiny, so good documentation is extra important in your price range.

Great question! Renovations that are capital improvements (like adding a new roof, remodeling a kitchen, etc.) get added to your property's basis and depreciated over the 27.5 years. Regular repairs (fixing a leaky faucet, replacing a broken window) can be deducted as expenses in the year you pay them. The distinction is important - capital improvements are long-term enhancements while repairs just maintain the property's current condition.

Thanks for clarifying! That helps a lot. So if I'm doing a $40k kitchen remodel, that would get added to the property basis and depreciated, but if I'm spending $300 to fix a toilet, that's just a regular expense I can deduct immediately?

Does FreeTaxUSA handle all the same forms? I have some investment stuff and a rental property too.

Yes, FreeTaxUSA handles all the same forms as TurboTax including investment income and rental properties. I have both and had no issues. The interface isn't quite as polished but it does the exact same calculations. The only real difference I noticed is it doesn't import some forms automatically like TurboTax does, so you might need to enter some information manually. But considering the price difference, it's absolutely worth the few extra minutes of typing.

What apps do you recommend for tracking mileage? I always forget to log my trips.

Oh that's a really good point I hadn't considered. I don't think I have any official appraisal from when I converted it in 2013. Would old real estate listings of comparable properties from that time period work as evidence? Or tax assessments from the county?

Tax assessments can help, but they're often below market value. Comparable property listings from that time period would be better evidence. You could also check with local real estate agents who might have historical sales data for similar properties in your area from that time. Another approach is to work backward from current appraisals and adjust for average appreciation in your area. Some tax professionals can help you create a reasonable valuation model if you have current data and local real estate growth statistics. The key is building a reasonable case for the value if you're ever questioned. Document everything and keep all supporting evidence with your tax records.

That's a great point. In my state, they actually have different rules for how the depreciation recapture is taxed compared to the federal level. I ended up having to amend my state return because I initially just carried over the federal calculations.

That sounds awful! How long did it take to get your accounts unfrozen? Did they require any special documentation?

It took almost 3 weeks and was a complete nightmare. I had to provide statements showing where the original money came from, signed letters from my family members confirming the purpose of the transfers, and copies of their ID documents. After all that, the bank "kindly" suggested I use proper remittance services in the future rather than accepting money into my personal account and sending it onwards. The whole experience was humiliating even though I wasn't doing anything wrong.

I've been using Wise for years to send money to my parents in Brazil. It's fantastic - low fees, great exchange rates, and it's all properly documented. Your friends can send money directly to your Wise account and you can forward it on, or better yet, they could just set up their own accounts.

Thanks for bringing this up! I'm in Illinois - does anyone know how dividends are treated here? I did a quick search and it seems like IL follows federal treatment but I'm not 100% sure.

Illinois generally follows the federal treatment of dividend income, so the dividends will be part of your federal adjusted gross income that flows to your IL-1040. Illinois has a flat income tax rate (currently 4.95%), so all your income including dividends will be taxed at that same rate regardless of whether they were qualified or ordinary dividends on your federal return. Unlike some states, Illinois doesn't have special treatment or separate schedules just for dividend income, which makes things a bit simpler. Just make sure your federal AGI (which includes your dividends) correctly flows to your state return.

VITA volunteers aren't always trained on investment income though. I tried using them 2 years ago and the volunteer told me they couldn't help with my stock sales, only with W-2 income. Might depend on which location you go to and who's volunteering that day.