I hadn't even thought about state taxes or the LLC angle. Do you know if forming an LLC changes how depreciation works? And would I need to file a separate business tax return if I create an LLC?

A single-member LLC is typically treated as a "disregarded entity" for tax purposes, so you'd still report everything on your personal return using Schedule E. The depreciation works the same way regardless of whether you have an LLC or not. You generally don't need to file a separate business return for a single-member LLC used for rental property. However, if you elect to have your LLC taxed as an S-corp (which some people do to potentially save on self-employment taxes), then you would file a separate return. But for most small landlords with one property, keeping it simple with a disregarded LLC is usually the way to go.

I used TurboTax Premier last year for my rental and it worked fine. It walks you through all the Schedule E stuff and helps calculate depreciation. Just make sure you keep really good records of your expenses throughout the year. The one time I got confused, I used their live help feature and the tax expert cleared things up quickly.

So should she adjust her W4 at her main job to have MORE tax taken out to compensate for the other jobs not taking enough? And is there a way to calculate exactly how much extra to withhold?

Yes, exactly! She should submit a new W4 to her main employer asking for additional withholding to cover the taxes from her other jobs. The easiest way to calculate this is to use the IRS Tax Withholding Estimator on their website. It lets you input information from all your jobs and will tell you exactly how to fill out your W4. You'll want to complete Step 4(c) on your W4 form which allows you to specify an additional dollar amount to withhold from each paycheck. The estimator will tell you the precise amount needed based on your multiple income sources.

The child tax credit is still there, but it's being offset by her underwithholding from multiple jobs. She's getting the credit, but she also owes more tax than was withheld throughout the year. If she DIDN'T claim her kid, she'd owe even MORE money because she wouldn't get the child tax credit at all, plus she'd have potential penalties for inaccurate filing.

That's really good advice! Would you recommend asking them any specific questions to gauge their knowledge about medical deductions? I wouldn't even know how to tell if they're giving me good answers since I don't know much about this stuff myself.

Ask them specifically about the 7.5% AGI threshold for medical expenses and how they would help determine if you should itemize. A knowledgeable preparer will explain that medical expenses are only deductible for the amount exceeding 7.5% of your adjusted gross income, and they'll want to know if you have other potential deductions that could make itemizing worthwhile. You could also ask what types of medical expenses are deductible that people commonly miss. They should mention things like mileage to medical appointments, lodging while receiving medical care away from home, home modifications for medical purposes, or certain insurance premiums. If they only mention obvious things like doctor bills, they might not have specialized knowledge.

Thats true, my local HR Block has an enrolled agent who specializes in medical deductions. Shes way better than the seasonal people they hire and not much more expensive. I've used her for 3 years now.

That's really interesting! I hadn't heard of a landlord contribution agreement before. Did your brother's arrangement require monthly payments to still be made, or was it entirely offset by the improvements? My situation is more informal - I help with utilities and maintenance but don't pay a set "rent" amount.

The arrangement didn't require full elimination of rent payments. They structured it so a portion of what would have been market-rate rent was offset by the documented improvement costs. There was still some payment happening to establish a legitimate landlord-tenant relationship, but significantly reduced. The key was having everything in writing with fair market values established for both the rent and the improvements. They also took photos before/after and kept all receipts. Their tax professional basically said the most important thing is showing this is a legitimate business arrangement, not just a family helping each other out informally. The more formal documentation you have, the better position you're in if questions come up.

Doesn't the IRS also have some kind of recapture rule if you claim these credits and then move out or sell within a certain time period? I feel like I read something about that when I was considering solar panels.

Isn't setting up a 501(c) really expensive and complicated though? I heard you need lawyers and stuff.

It's not as bad as people think. For a small organization, filing for 501(c)(3) status using Form 1023-EZ is relatively straightforward if your annual gross receipts are under $50,000. The filing fee is around $275. You don't necessarily need lawyers, though having someone with experience look over your application can help. There are also online services that guide you through the process for a few hundred dollars. The main requirements are having proper bylaws, a board structure, and clear charitable purpose. Once established, annual maintenance is just filing a simple Form 990-N if you stay under the $50,000 threshold.

This is actually what we do for our school's charity auction. People make checks directly to the charity, and we just collect them. Simplifies everything tax-wise.