This is super important advice! My daughter started her first job last year and we had to figure this out. The rules are: If you're under 24 and a student, or under 19 otherwise, AND your parents provide more than half your support, they can claim you. But you need to coordinate with them before either of you file.

Oh! I totally forgot about state taxes. I moved from Michigan to California for this job in August. Does that mean I need to file in both states?

Yes, you'll need to file a part-year resident return for both Michigan and California since you earned income in both states during 2024. This is called filing a "part-year resident return" in each state. The good news is that tax software can handle this situation - you'll just need to indicate when you moved and which parts of your income were earned in each state. There are credits to prevent double taxation, so you won't pay taxes twice on the same income. California has some of the highest state income taxes in the country, while Michigan's rates are lower, so be prepared for that difference. The software will calculate everything correctly as long as you input your moving date and income sources accurately.

This is good advice. What about state taxes? Does making the federal election to treat spouse as resident mean you have to do the same for state taxes? My wife just got here in October and earned income in California for 3 months.

Great question about state taxes. It varies by state, but most states will follow the federal filing status. However, state residency rules can be different from federal rules. For California specifically, they generally respect the federal election, but your wife would only be taxed on California-source income for the period she was physically present in the state. I'd recommend checking with the California Franchise Tax Board or running your scenario through tax software that handles state taxes well. California is particularly strict about residency and taxation, so you'll want to get this right.

Totally agree - my wife had a good job in Singapore for 7 months before moving here and we ended up paying more tax by filing jointly than if we'd kept her as a non-resident for that first partial year.

This is so helpful! I've been stressing about this for days. For the Form 8833, would I need to file that even if I'm NOT claiming treaty benefits and actually want to pay taxes on the income that was incorrectly marked as exempt? Also, is there any chance filing with this discrepancy could delay my refund?

If you're NOT claiming treaty benefits (meaning you want to pay tax on income that was incorrectly marked exempt), you don't need to file Form 8833. Instead, you would include a brief statement explaining that the 1042-S was issued with incorrect exemption codes and that you're properly reporting the income as taxable. As for your refund, there's a small possibility of delay if the IRS system flags the discrepancy between your reported taxable income and the exempt income reported by your broker. However, for small amounts like yours, it's unlikely to trigger a significant delay. If you include clear documentation explaining the situation, that helps minimize potential issues.

I used Sprintax last year for my F-1 taxes with dividend income. It does handle 1042-S forms, but I found it a bit confusing for investment income specifically. It asks a lot of questions about your tax residency status and treaty eligibility. The plus side is that it knows the rules for students vs regular nonresident aliens, so it should apply the right tax treatment even if your forms are coded wrong.

You're glossing over important context here. The economy and investment landscape in the 1970s was completely different than today. Many more middle-class people are invested in the market now through 401ks and IRAs. Plus, what starts as a tax on the wealthy often trickles down to impact everyone eventually.

You're right that the investment landscape has changed since the 1970s, but you're missing a critical point: retirement accounts like 401ks and IRAs aren't subject to capital gains taxes at all. They're either tax-deferred (traditional) or tax-free for qualified withdrawals (Roth). These proposed changes would have zero effect on most middle-class retirement savings. As for the "trickle down" tax concern, capital gains tax rates have historically been quite stable for middle income brackets. The 15% rate that most middle-class investors pay has remained consistent for decades across both Republican and Democratic administrations. The changes nearly always happen at the top brackets, not the middle ones.

The capital gains tax rate has varied significantly throughout history. Under Reagan, the Tax Reform Act of 1986 actually raised the maximum capital gains rate to 28% (up from 20%). Under Clinton, it was lowered to 20% in 1997. George W. Bush reduced it to 15% in 2003. Under Obama, it went up to 20% for high earners, plus the 3.8% Net Investment Income Tax was added as part of the Affordable Care Act, bringing the effective rate to 23.8% for high-income individuals. The highest capital gains rate was actually around 35% in the late 1970s before Reagan's first round of tax cuts. The 44.6% rate would indeed be the highest since the tax was created, though it would only apply to those making over $1 million annually.

Thanks for that historical breakdown! Really helpful to see how the rates have changed over different administrations. So if I understand correctly, we've basically been in the 15-28% range for most modern history, with some additional taxes added more recently that brought it to around 23.8% for high earners. The proposed 44.6% would be a significant jump from where we've been for the last several decades, even if it only affects millionaires. I'm curious to see if Congress will actually pass something this high or if they'll negotiate it down.

I'm in California and had this exact same issue! When I called the warranty company they explained that in California, labor for repairs is taxable, so even though the deductible is a flat fee, they have to charge tax because it's considered payment toward the labor portion of the repair. Super annoying but apparently legal here.

That's a great point about checking the specific state laws. Tennessee definitely taxes almost all services, which is why we see it on warranty work. California's system makes sense too - if the deductible is specifically allocated toward labor rather than being a general "access fee," then it would fall under service taxation rules in states that tax labor.

That explanation actually makes the most sense. So its not that the deductible itself is taxed, it's that we're paying for a portion of a taxable service?