I like this approach! For the quarterly reviews, are you finding that classifications change over time? For example, does new development eventually become maintenance in subsequent quarters?

Yes, we've definitely seen that transition from new development to maintenance over time. As features mature, work on them tends to shift from primarily new development to mostly maintenance and refinement. We actually created a simple lifecycle model where new features start as 100% development, then after initial release they transition to a mixed classification, and finally to predominantly maintenance after they've been in production for a certain period. The exact timing varies by feature complexity, but having this framework helps us be more consistent in our classifications over time.

This is actually a nuanced question. Open source contributions can potentially qualify as R&E if they're related to your business and provide some benefit to your company's products or services. The key is whether these contributions represent research or experimentation that might lead to development of new products or improvements to existing ones.

10 Wait so if my daughter has a 1098-T but I claim her as a dependent, does she still file her own return for the scholarship income, but I'm the one who claims the education credits on my return? This is confusing!

11 That's exactly right. If your daughter has taxable scholarship income, she would file her own return to report that income. However, since you claim her as a dependent, YOU would be the one to claim any education tax credits related to her education expenses on YOUR tax return, not hers. This is one of the most confusing aspects of education-related tax situations. The parent claims the education credits (if eligible), while the student reports any taxable scholarship income. Just make sure you're not both trying to claim the same expenses!

2 Good point! What states have notably lower thresholds? I'm in California and wondering if my kid needs to file state even if not federal.

This is a gray area. The IRS guidance states that computer equipment can be a qualified education expense if it's needed for enrollment or attendance. Since your courses had online components that required a computer, you have a legitimate case.

I successfully claimed a new laptop last year. The key was documenting how it was necessary for my specific program. My university had a policy stating students needed "access to a computer" for certain courses, which I printed out and included with my tax documents. Also saved course syllabi that mentioned required online components.

Oh that's really good to know! My university lumps everything together on one statement - tuition, fees, housing, meal plan, health insurance, etc. I need to make sure I'm only including the qualified items in my appeal. Is there an easy way to separate these out?

most schools will give you an itemized statement if you request it from the bursar or student accounts office. just ask for a "detailed statement of account" with all charges broken down by category. thats what i did and it made it super clear which items were tuition/fees vs housing/meals. some schools also have a separate form they can provide specifically for tax purposes that only shows the qualified education expenses. worth asking if they have something like that!

3 Did you have to fill out any special forms to document the support calculation? I've been trying to figure out if there's an official worksheet or something for this. My son made about $32k from gaming tournaments this year.

18 There's no specific IRS form for the support calculation, but I created a simple spreadsheet showing the total cost of my daughter's support (housing, food, education, medical, clothing, etc.) and what portion I paid versus what was paid from her earnings. I kept receipts for major expenses just in case. For your son's gaming tournaments, make sure you understand if they're considered prizes/awards (reported on Line 8 of Schedule 1) or self-employment income (Schedule C) - they're treated differently for tax purposes. In my daughter's case, her online business income required Schedule C and self-employment tax, which was a big surprise our first year dealing with it.

7 Good question! The kiddie tax only applies to unearned income (investment income, interest, dividends, capital gains) - not to earned income like modeling or acting wages. If your child performer is just earning wages, the kiddie tax doesn't apply at all. However, if they're earning enough that you're investing some of that money and generating significant investment income, then the kiddie tax could come into play. For 2024, the first $1,250 of unearned income is tax-free, the next $1,250 is taxed at the child's rate, and anything above $2,500 in unearned income would be taxed at the parent's rate.

Doesn't ProSeries require a professional preparer license or something? I thought it wasn't available for individuals who are just trustees filing their own trust returns.

ProSeries does market primarily to professionals, but they do have a version available for individuals managing their own trusts. You don't need a PTIN or professional credentials to use it. The interface is a bit more complex than consumer software like TaxAct, but it gives you more flexibility for handling multiple entities. If you're comfortable with more advanced tax concepts (which it sounds like you are), the learning curve isn't too steep.

I used TurboTax Business last year for two trusts. You can do multiple returns, but you have to pay separately for each one. Interface is decent but TaxAct is more cost-effective if you have multiple trusts.