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Zane Gray
One thing to be careful about with Section 1231 gains is the "look back rule." If you had any 1231 losses in the previous 5 years, your current 1231 gains are treated as ordinary income to the extent of those prior losses. This could affect whether your full gain qualifies for OZ treatment. Also, remember that even though you can defer the tax until 2026, you'll eventually have to pay it. Make sure you'll have the liquidity to pay that tax bill when it comes due, since it's not forgiven - just deferred.
Tasia Synder
ā¢Thanks for bringing up the look-back rule - I hadn't considered that! I do have a small 1231 loss from a property I sold in 2023. So if I understand correctly, a portion of my current gain would be considered ordinary income rather than capital gain? Would that portion not be eligible for OZ investment?
Zane Gray
ā¢Yes, exactly. If you had a 1231 loss in 2023, a portion of your current 1231 gain would be recaptured as ordinary income to the extent of that previous loss. That recaptured portion would not be eligible for OZ investment, since OZ investments can only be made with capital gains. For example, if you had a $10,000 1231 loss in 2023 and now have a $50,000 1231 gain, $10,000 of your current gain would be treated as ordinary income and only the remaining $40,000 would be treated as capital gain eligible for OZ investment.
Has anyone here actually invested in an OZ fund? I'm considering it but worried about limited options and high fees. Most of the funds I've looked at have 2% management fees plus performance fees, which seems high.
I invested in an OZ fund after selling a small apartment building in 2022. The fees are definitely higher than typical investment funds, but remember you're getting tax benefits that can offset those costs. I went with a fund focused on multifamily development in emerging markets which aligned with my investment goals. Make sure you do due diligence on the fund manager's track record and understand the timeline - you need to hold for 10+ years to get the full tax benefits on appreciation. And be prepared for the tax bill in 2026 on your initial deferred gain.
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Just wanted to add that if you're using Schedule C and Form 8995A, don't forget about the Section 199A deduction which is related to your Qualified Business Income. It's basically a 20% deduction on your net business income if you're below those income thresholds someone mentioned. Also, since you have HSA contributions with an HDHP, make absolutely sure you're maximizing that! For 2024, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage (plus $1,000 catch-up if you're 55+). This is literally the best tax advantage available - it goes in pre-tax and comes out tax-free for medical expenses.
Khalid Howes
ā¢Thanks for the reminder about the Section 199A deduction! Is that handled automatically through Form 8995A or do I need to do something else to claim it? For the HSA, I'm contributing the maximum for individual coverage. One question though - if I switch to family coverage mid-year, can I contribute the full family amount or is it prorated?
Form 8995A is specifically for calculating your Section 199A (Qualified Business Income) deduction, so no need to do anything additional. It flows automatically to your 1040. For HSA contributions after switching to family coverage mid-year, it gets a bit complicated. You can actually contribute the full family maximum ($8,300 for 2024) if you're still covered by a family HDHP on December 1st and remain covered for the full calendar year of 2025 (called the "last-month rule"). If you don't maintain coverage through December 2025, you'd need to prorate your contribution based on how many months you had each type of coverage.
Kara Yoshida
Don't forget that your self-employment tax (Schedule SE) is based on 92.35% of your net earnings from self-employment, not the full amount! This trips up a lot of first-timers. The reason is that employees only pay half of FICA taxes while employers pay the other half, but self-employed people pay both halves. The 7.65% reduction compensates for this. Also, you can deduct half of your self-employment tax on Schedule 1, line 15. This is an adjustment to income, so you get this deduction even if you don't itemize.
Philip Cowan
ā¢Just a quick correction - the SE tax is actually 15.3% (12.4% Social Security + 2.9% Medicare) on that 92.35% of net earnings, up to the Social Security wage base limit ($168,600 for 2024). Then 2.9% Medicare tax continues beyond that with no limit, plus an additional 0.9% for high earners. But your point about deducting half on Schedule 1 is super important - loads of people miss that and it's a significant deduction!
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Did you check the supplemental information that comes with the 1099-B? Sometimes Robinhood puts the crypto details in a separate section or additional pages. I had the same issue last year and found that they included all the crypto transaction details in what they call the "Consolidated 1099 Information" section rather than in the main form boxes.
NeonNomad
ā¢Yes! I just double-checked and found it in the supplemental pages! There's a whole separate section for "Proceeds from Broker and Barter Exchange Transactions" that has all the info I need, including acquisition date and cost basis. Thanks for pointing this out - I was only looking at the first page.
Glad you found it! Robinhood's tax documents can be confusing because they combine different forms into one package. That supplemental section is actually the most important part for crypto transactions since it contains all the details you need for Form 8949. Just make sure you're using the correct acquisition dates since that determines whether it's long-term or short-term capital gains.
Yara Khoury
anyone else notice that robinhood sometimes gets the cost basis slightly wrong? i had to manually correct mine last year. check your transaction history in the app and compare it to what's on the form.
Yep, happened to me too. The cost basis on my 1099-B was off by about $25 compared to what my actual purchase price was. I had to file a Form 8949 with code B to indicate the cost basis was reported incorrectly to the IRS.
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One thing nobody mentioned - if you're paying these artists through Venmo and then taking your cut, you might actually have "pass-through" income that's treated differently than your commission income. You really should separate these in your books. Let's say Artist gets paid $1000 from Platform, sends you the full $1000 via Venmo, and you keep $200 as your commission and send the artist $800. Your actual income is only $200, not the full $1000, but Venmo might report the full $1000 on your 1099-K. You need good records to show that $800 was pass-through money that isn't actually your income!
StarSailor}
ā¢This is really helpful - I hadn't thought about the pass-through issue. In my case, the artists are receiving payment directly from their platforms and then sending me my percentage (usually 15-20%). So if they make $1000, they'd send me $150-$200 via Venmo. Does that simplify things since I'm only receiving my commission portion?
That definitely simplifies your situation! Since you're only receiving your commission portion directly, there's no pass-through income to worry about. The full amount you receive through Venmo is indeed your business income that should be reported on your Schedule C. Just make sure you're tracking each payment received with details on which artist it came from, what platform earnings it relates to, and the commission percentage applied. This documentation will help support your reported income if you're ever questioned. It's also smart business practice to send your artists an annual statement showing the total commissions they paid you, both for their records and yours.
For your Thailand contractors, make sure you're not accidentally violating any treaty stuff! Some countries have specific tax treaties with the US that determine how payments to their citizens should be handled. This gets complicated fast - one reason why proper documentation is super important. Also worth checking if you need to report these payments on a separate form - sometimes Foreign Contractor payments have additional reporting requirements beyond just deducting them on Schedule C.
This might be overkill for small payments though. I pay VAs in the Philippines less than $5k each per year and my accountant said as long as I have good documentation of the work performed and payments made, I don't need to worry about additional foreign reporting forms. Might depend on the dollar amount?
Connor Rupert
Just wanted to add something important that hasn't been mentioned yet. When you're dealing with after-tax funds in a SEP IRA that were never reported, you need to be careful about the statute of limitations. Generally, the IRS has 3 years to audit your returns, but this can be extended in certain situations. In your case, since these contributions weren't reported at all, you might want to consult with a tax professional about any potential risks before proceeding with the conversion. Also, make sure you have documentation of those original contributions from 7 years ago - bank statements showing the transfers to the SEP, etc. The more documentation you have to support your claim that these were after-tax contributions, the better off you'll be if there are any questions.
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Miles Hammonds
ā¢Thanks for bringing this up - I hadn't considered the statute of limitations angle. Do you think filing the Form 8606 now for those old contributions might trigger some kind of review of those past tax years?
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Connor Rupert
ā¢Filing Form 8606 now for old contributions typically doesn't automatically trigger an audit, but it does put those years on the IRS's radar. The good news is that you're trying to comply with the rules by properly documenting your basis in the IRA, which looks better than if they discovered the unreported contributions some other way. The key is documentation - make sure you have records of all those contributions and be prepared to show they were made with after-tax dollars. If you're concerned, working with a tax professional who specializes in IRA issues might be worth the investment to ensure everything is handled properly and to help respond if the IRS does have questions.
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Molly Hansen
Has anybody considered that the OP could potentially benefit from the losses in the SEP IRA? If the original contributions were $60k and current value is $38k, that's a significant loss. While you can't typically deduct IRA losses, if you liquidate ALL your IRAs (of the same type) and the total distribution is less than your basis, you might be able to claim the loss as a miscellaneous itemized deduction subject to the 2% AGI floor. Though I believe this was suspended under the TCJA until 2026.
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Brady Clean
ā¢This is incorrect information. The Tax Cuts and Jobs Act eliminated the deduction for IRA losses completely through 2025. Even before that, claiming such losses was extremely difficult and rarely beneficial due to the AGI limitations. Please don't give tax advice if you're not certain - it could cause serious problems for the OP.
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