Would it be better to fax the response instead of mailing it? I've heard the IRS processing centers have huge backlogs of mail but faxes get entered into their system faster.

In my experience, faxing can be faster but only if you have confirmation the fax went through successfully. The IRS fax lines are often busy or don't connect properly. I'd recommend doing both if possible - send via certified mail for your records and also try faxing. The key thing regardless of method is making your documents super clear and organized. Put your notice number, SSN (last 4 digits only for security), and tax year on every single page. The IRS processes millions of pieces of correspondence and making yours easy to identify with the right case helps tremendously.

That doesn't sound right. If someone incorrectly claimed you as a dependent when you weren't actually qualified to be one, you should still be eligible for your own stimulus payment. The IRS even has procedures for resolving these exact situations.

Do you have any recommended books or resources that give a more nuanced view of progressive taxation beyond the textbook definition?

For a more nuanced understanding, I recommend "Taxing Ourselves" by Joel Slemrod and Jon Bakija - it explores different tax bases and structures without getting stuck in the income-only paradigm. "The Triumph of Injustice" by Saez and Zucman also has excellent discussions of wealth-based progressive taxation alternatives. For historical perspectives, "Fiscal Regimes and the Political Economy of Premodern States" edited by Monson and Scheidel provides fascinating examples of progressive taxation based on various metrics across different civilizations. These sources paint a much more complete picture than standard economics textbooks.

That's fascinating! Do you think there's any chance we'll see a broadening of how we define and implement progressive taxation in the near future? Especially with all the discussions about wealth inequality?

That's a really good point I hadn't considered. We're not planning to sell anytime soon, but the housing market in our area has been growing pretty rapidly. Do you know if there are any requirements about how long you need to be married to qualify for the full $500k exclusion when selling?

To qualify for the full $500K married exclusion when selling, you need to have owned and lived in the home as your primary residence for at least 2 of the last 5 years before selling. And you need to be married when you sell the house, not necessarily when you bought it. The ownership test and the residence test are separate, so you need to meet both. As long as you're married when you sell and meet those requirements, you should be eligible for the full $500K exclusion regardless of when the marriage occurred during your ownership period.

This is such a good point. My husband and I both owned properties before marriage in high-tax states and got absolutely crushed by this after getting married. We literally pay thousands more in taxes now because of the SALT cap. If you're in a high-tax state, run the numbers carefully.

Thanks for mentioning this! I think I might actually have some suspended passive losses from years when my income was too high to claim them. How exactly do I check for this? Is it on a specific form from previous tax returns?

You'd need to look at your Form 8582 (Passive Activity Loss Limitations) from previous tax years. If you had passive losses that couldn't be used in a particular year due to income limitations, they would be carried forward and should be documented there. The unused losses accumulate over the years, and when you dispose of the property in a taxable transaction (like your sale), you can generally use all the suspended losses related to that property. This could significantly reduce the tax impact of your sale and the depreciation recapture.

Cost segregation is great when you're starting out with a property because you can accelerate depreciation on components with shorter lives (5, 7, 15 years instead of 27.5 years for residential). But it's a double-edged sword when selling because you'll face recapture on those components too. The benefit is that personal property components (5-7 year property) get recaptured at your ordinary income rate, not the 25% rate that applies to real property depreciation. So if your tax bracket is lower than 25%, it can help.

1 I actually did replace the HVAC system about 6 months after inheriting it. Would that count? It cost around $9,000. I should have the receipt somewhere in my email.

2 Yes, that absolutely counts! A new HVAC system is considered a capital improvement, not just a repair. Make sure to add that $9,000 to your stepped-up basis. Any significant improvements that extend the life of the property or add value can be included. Just make sure you have that receipt handy in case of an audit.

20 I used a CPA last year for my inherited property sale. Cost me about $350 but worth every penny for the peace of mind. Regular tax preparers at chain places were clueless about stepped-up basis rules.