I hadn't thought about the backdoor Roth approach. Would that still work if my tax liability is already zero? And would I still need to worry about the documentation of foreign expenses if I go that route?

The backdoor Roth works regardless of your tax liability because you're making non-deductible contributions to a traditional IRA first, which doesn't require you to have tax liability. You'd report these non-deductible contributions on Form 8606. No need to worry about foreign expense documentation for this approach. You can take the full standard deduction, apply your FTCs to reduce your tax to zero (carrying forward any excess), and still do the backdoor Roth. The only documentation you need is for the FTCs themselves (foreign tax statements or equivalent), not itemized expenses.

FTCs can only be carried forward, not backward. You can carry them forward for up to 10 years, but you can't apply them to prior year returns unfortunately.

Thanks for bringing this up, but I don't think a 1031 exchange would work in my situation. From what I understand, those are only for investment properties, and this has been my primary residence. Plus I'm actually planning to rent for a while after selling, so I wouldn't have another property to exchange into. The capital gains exclusion for primary residence is really what I need to make this work financially.

You're absolutely right about the 1031 exchange only being for investment properties. I should have been more clear about that distinction. Since you're living in it as your primary residence and planning to rent afterward, the capital gains exclusion is definitely your best option. In that case, I'd focus entirely on documenting your efforts to sell within the timeline. One additional suggestion - have your real estate agent provide a written statement about typical closing timeframes in your market right now. That kind of third-party documentation can be helpful if questions ever come up.

Did you have to provide any special documentation with your tax return to show the listing date or the failed deals? Or did you just claim the exclusion normally?

Can you explain this more? I thought scholarships automatically applied to tuition first, then room and board. Are you saying we can choose how to allocate the scholarship money for tax purposes? That could be huge for us.

Yes, you generally can choose how to allocate scholarship funds between qualified expenses (tuition, fees, books) and non-qualified expenses (room, board, travel) for tax purposes. This isn't obvious to most people and can make a significant difference! For example, if tuition is $15,000 and room/board is $10,000, with a $20,000 scholarship, you could allocate $10,000 of the scholarship to room/board (making it taxable) and only $10,000 to tuition. This leaves $5,000 of paid qualified expenses that could qualify for education credits. This often results in a better overall tax situation than automatically applying scholarship to tuition first.

I went through this with my son. What we did was adjust his W-4 at his summer job to withhold extra to cover the scholarship tax. If your daughter doesn't work at all, you might consider gifting her the tax amount (up to $17,000 is gift-tax free) or paying it directly to the IRS on her behalf.

Would you say the same is true for small side businesses? I drive for Uber on weekends but not sure if that makes things complicated enough for professional help.

Side gigs like Uber definitely add some complexity, but they're still manageable with good tax software. You'll need to track business expenses (mileage, portion of phone bill, etc.) and file Schedule C, but most tax programs walk you through this process with specific questions for rideshare drivers. If your side business grows substantially or you have multiple income streams, that might be when professional help becomes more valuable. The key is honestly assessing the complexity of your situation. One straightforward side gig is typically still in DIY territory, especially with the specialized guidance modern tax software provides.

This is the way. I've been using FreeTaxUSA for years and it's so simple. Federal filing is free and state is only like $15. Way better than TurboTax that tries to upsell you every 5 seconds.

Do Acceptance Agents charge a lot? And would using one make the process faster? My main concern is the timeline since I have potential clients waiting for me to get all this paperwork sorted out.

Acceptance Agents typically charge between $50-$300 depending on the complexity of your situation and their location. Some offer additional services like reviewing your entire application package. Using an Acceptance Agent can potentially make the process faster because they help ensure your application is complete and correct the first time, reducing the chance of rejection and resubmission. They also eliminate the risk of your original documents getting lost in the mail. However, they don't actually speed up the IRS processing time - once your application reaches the IRS, it still goes through their standard processing queue. That said, a complete and accurate application will move through that queue without delays.

Unfortunately there's no online tracking system for ITIN applications like there is for tax refunds. You have to call the IRS ITIN department directly at 1-800-908-9982. Make sure you have your application confirmation if you received one, or at least the information about when and how you submitted it.