That's a really good point I hadn't even thought about! My friend is living in Germany now - would they have a similar tax treaty situation? How complicated is it to claim those foreign tax credits?

Yes, Germany and Canada do have a tax treaty that should prevent double taxation. Your friend will need to report the Canadian property sale on their German tax return, but they can claim a credit for taxes paid in Canada. For claiming the credits, they'll need documentation showing the exact amount of Canadian tax paid specifically attributable to the property sale. The process isn't super complicated, but it does require careful documentation. Make sure they keep copies of their Canadian non-resident return, the T2062 form, and proof of the tax withholding and any refund they receive. German tax authorities may want to see these documents.

This is so true! My family had the same issue with a property in Montreal. The 1994 capital gains election can make a huge difference in the adjusted cost base. Also worth noting that if they ever did any major renovations, those costs should be added to the ACB as well.

Yeah, finding documentation from 20+ years ago can be a real challenge though. If they made the election back in 1994, the CRA should have it on file, but you might need to specifically request that information. Some accountants keep spreadsheets showing the impact of various capital gains changes over the years for long-term held properties. Especially important for non-residents since they don't get the principal residence exemption for years they weren't Canadian residents.

I hadn't even thought about insurance or retirement accounts! Do you have recommendations for affordable E&O insurance for a solo developer? And for the Solo 401(k), can I set that up myself or do I need to go through a special provider?

For E&O insurance, I use Hiscox which has reasonable rates for solo developers - usually $500-1000/year depending on your projects. Some clients actually require this in contracts, so it's worth having anyway. For the Solo 401(k), you can set it up yourself through providers like Fidelity, Vanguard, or Charles Schwab for free. The paperwork is a bit involved but not terrible. The huge advantage is you can contribute both as the "employee" (up to $22,500 in 2023) AND as the "employer" (up to 25% of your net earnings) for a much higher total than regular IRAs allow. Just make sure you set it up before December 31st of the tax year you want to use it for.

Adding to this - make sure you're accounting for self-employment tax (15.3%) on top of regular income tax. It catches a lot of first-time contractors off guard. You pay both the employer and employee portions of Medicare and Social Security taxes. You can deduct the employer half though.

Do all states tax capital gains? I thought some states like Florida and Texas don't have income tax, so would they still tax capital gains from property sales?

You're absolutely right - states without income tax generally don't tax capital gains either. Florida, Texas, Wyoming, Nevada, South Dakota, Washington, Alaska, and New Hampshire don't have state income taxes, so you wouldn't pay state-level capital gains taxes in those locations. However, even in those states, you still need to pay the federal capital gains tax. And some states have other property-related taxes or transfer taxes when selling real estate that could still impact your total tax burden.

Are routine maintenance costs considered capital improvements? Like, if I replaced the water heater or fixed a leaky roof, does that count? Or only major renovations?

Do you know if converting from an FSA to HSA mid-year affects the contribution limits? My company is switching our health plans in July and I already contributed to an FSA.

Yes, it definitely affects your contribution limits. When you switch from an FSA to HSA mid-year, you generally have to prorate the HSA contribution limit based on the number of months you're eligible. If you make a mid-year switch, you can only contribute 1/12 of the annual limit for each month you're HSA-eligible. However, there's something called the "last-month rule" that might help - if you're HSA-eligible on December 1, you can potentially contribute the full year's limit, but you must remain HSA-eligible through December of the following year (called the testing period) or face penalties on the accelerated portion.

Does FreeTaxUSA handle situations where you've changed jobs mid-year and have HSA contributions from two different employers? That's what I'm dealing with now.

What happens if the numbers don't match between my last pay stub and W-2? My retail job's W-2 shows about $200 less in income than my December pay stub indicated for the year.

If there's a discrepancy between your W-2 and pay stubs, first check if there's a logical explanation. Sometimes the last paycheck of December might be paid in January, which would explain why the W-2 total is lower than your December pay stub shows. If there's no clear explanation, contact your employer's payroll department directly. They can check their records and issue a corrected W-2 (called a W-2c) if needed. Small differences might occur due to non-taxable benefits or other adjustments, but anything significant should definitely be investigated before you file.

Did you have to pay a penalty too or just the interest? I'm worried because I just realized I forgot about a small job I had last year (only made like $600).