Can you explain what "recapture" means in this context? If I depreciate $20k of improvements over the years and then sell my house, what happens exactly?

Recapture means you'll pay taxes on the depreciation benefits you received when you sell the property. For example, if you depreciated $20k of improvements over the years, when you sell, that $20k will be taxed at a special 25% depreciation recapture rate (not your regular income tax rate). Even if you qualify for the $250k/$500k capital gains exclusion on your primary residence, the depreciation recapture is still taxable. So while you save money now by taking the depreciation deductions against your rental income, you will have to pay some of it back when you sell. It's essentially a tax deferral strategy rather than a complete tax avoidance.

I claimed it last year - you get 30% of BOTH equipment and installation costs! Just make sure you have documentation showing it meets the energy efficiency requirements. The contractor should have provided that.

17 This is actually a really good point. I'm in New York and they hit me with penalties even when the federal government didn't. Check your state's department of revenue website - some states offer first-time penalty abatement if you've had a good filing history before this.

So if I want to buy bonds for my kids, how exactly would I format that? Would it be "Child Name POD My Name" or the other way around?

For buying bonds as gifts for your kids, you would format it as "Child's Name POD Your Name" in the registration box. This makes your child the primary owner with you as the beneficiary who can cash them if needed while they're minors. If your child is very young, this is usually the best approach since they can't manage the bonds themselves yet, but they're still considered the owner. Once they're older, they can cash them with proper ID. Just make sure to include their Social Security Number on the form too.

There's a $5,000 annual limit per person for purchasing paper savings bonds. So if your refund is $5,000 and you're the only registrant, you could use the whole thing. If you're buying for multiple people (like kids), each person can have up to $5,000 in bonds purchased for them annually.

Also remember bonds only come in $50 increments, so make sure your amounts are divisible by 50 on the form!

Does the 83(b) election apply to stock options too, or just restricted stock? My offer letter mentions ISOs but I'm not sure if this is relevant for my situation.

The 83(b) election generally applies to restricted stock, not stock options. For ISOs (Incentive Stock Options), you typically don't need to make an 83(b) election because you don't actually own the shares until you exercise the options. With ISOs, you don't pay taxes when they're granted or as they vest. You only pay taxes when you exercise the options (buy the shares) and later when you sell the shares. However, there are some complex AMT (Alternative Minimum Tax) considerations with ISOs that might apply depending on your situation. If your compensation includes actual restricted stock (not just options), then the 83(b) would be relevant. Check your specific grant documents to confirm exactly what type of equity you're receiving.

I filed one last year and never got any formal acknowledgment from the IRS. My tax advisor said that's normal - you just need to keep your certified mail receipt as proof you sent it within the 30-day window. When you file your taxes, you'll attach a copy of the election form. I also sent a copy with a self-addressed stamped envelope requesting they stamp it as received and return it, but never got that back either.

This is super helpful, thank you!! So to clarify - on my 2023 Form 8606, I'll only complete lines 1-7 (or 1-8)? And then for 2024, I'll need to report the actual conversion on that year's form?

Exactly! For 2023, you'll only complete Part I (lines 1-7 or 1-8) to establish your nondeductible contribution and basis. You won't complete Part II (the conversion section) on your 2023 form. Then on your 2024 Form 8606, you'll complete both parts. Part I will show any new 2024 contributions, and Part II will show your April 2024 conversion of the 2023 contribution. Your basis from the 2023 form carries over to the 2024 form. This ensures you don't get taxed twice on the money. The important thing is making sure you file the 2023 Form 8606 to establish that initial basis, even if you're not reporting a conversion on it.

I switched to FreeTaxUSA after TurboTax kept calculating my Form 8606 wrong. It has better handling of backdoor Roth conversions and actually explains the basis calculations clearly. Plus it's way cheaper!