Remember that you also need to think about state taxes! Federal rules are one thing, but states often have different treatment. I'm in California and they don't have an AMT system that matches federal exactly, so my calculations were all different. Make sure you're considering both.

Great question! As someone who's been through a similar situation, I can confirm what others have said about the complexity of ISO taxation. One thing I'd add is to consider the timing of your exercise in relation to your company's lock-up period ending (if applicable). Many people exercise right after IPO without realizing they can't sell during the lock-up, which can create cash flow issues if AMT kicks in. Also, since you mentioned your husband has significant short-term capital losses to carry forward, you might want to explore a mixed strategy: exercise some options now and hold (to start the long-term capital gains clock), and plan to exercise additional tranches in future years when you can immediately sell to utilize those losses. One more tip - if you're planning to exercise and hold, make sure you have enough cash set aside for the potential AMT hit. I've seen too many people get caught off guard by the tax bill on "paper gains" they haven't actually realized yet. The AMT can be substantial even when you haven't sold anything. Good luck with your decision!

Just wanted to add some clarification on the MAGI calculation since I see some confusion in the comments. You're absolutely right that traditional IRA contributions don't reduce MAGI for determining deductibility - that would indeed be circular. However, it's worth noting that if you WERE eligible for the deduction (i.e., if your income was lower), THEN the traditional IRA contribution would reduce your MAGI for other tax purposes like determining eligibility for other credits or benefits. In your case at $93k post-401k, you're unfortunately well above the threshold. But here's a potential strategy: if you can increase your 401k contribution by even more (up to the $23,000 limit for 2025), that could potentially get your MAGI low enough to qualify for at least a partial traditional IRA deduction. For example, if you could contribute an additional $7k+ to your 401k, that would bring your MAGI down to around $86k or below, potentially making you eligible for the traditional IRA deduction. Of course, this only works if you have the cash flow to support the higher 401k contributions.

Great discussion here! Just to add one more perspective - I was in almost the exact same situation last year. Making around $105k, maxing out my 401k, and thinking I could squeeze out a traditional IRA deduction. What I learned the hard way is that once you're covered by a workplace plan, those income limits are pretty strict. At $93k MAGI after your 401k contributions, you're definitely above the $86k cutoff for any deduction. I ended up going the backdoor Roth route that several people mentioned. The process was actually simpler than I expected - contributed $6k to a traditional IRA (non-deductible), then immediately converted it to Roth. No taxes on the conversion since there were no earnings, and now that money grows tax-free. One thing to watch out for - make sure you don't have any other traditional IRA balances with pre-tax money, or you'll run into the pro-rata rule complications. If you do, consider rolling those into your current employer's 401k first if they allow it. The backdoor Roth has been a game changer for getting more money into tax-advantaged accounts at our income level. Definitely worth exploring!

This has been such an informative discussion! I'm dealing with a similar NOL situation with my marketing consulting business. One aspect I haven't seen mentioned yet is the state tax implications - does anyone know if NOL carryforwards work the same way at the state level? I'm in California and I'm wondering if the state will recognize my federal NOL carryforward, or if they have different rules. Some states don't conform to federal NOL provisions, and with California's tendency to have their own tax rules, I want to make sure I'm not missing anything important. Also, for those who have successfully navigated the NOL process, how did you handle the bookkeeping and tracking year over year? I'm concerned about properly documenting the carryforward amounts for future tax returns, especially if I end up with NOLs for multiple years or only use partial amounts in future years. The strategic timing advice from Kolton is brilliant - I'm definitely going to look at accelerating some planned equipment purchases before year-end to maximize my NOL. Better to get the full benefit now rather than depreciating over multiple years when I might not have enough income to fully utilize the deductions.

This thread has been incredibly educational! I'm a freelance web developer who's been putting off dealing with a similar NOL situation from last year when several major projects fell through and I had significant equipment and software licensing expenses. Reading through everyone's experiences, I realize I need to stop procrastinating and properly calculate my NOL using Form 1045 Schedule A rather than just assuming my Schedule C loss equals my NOL. The strategic timing advice about accelerating expenses is particularly relevant since I'm facing another potentially tough year. One question for those who've been through this - if you have an NOL carryforward available but your income in the following year is relatively low, is there any benefit to NOT using the full amount you're entitled to? I'm thinking about the 80% limitation and wondering if it might make sense to save some NOL for a higher income year, or if you're always better off using as much as possible each year. Also, has anyone dealt with NOLs while also receiving unemployment benefits? I had a period where I was collecting unemployment while trying to rebuild my client base, and I'm not sure how that factors into the NOL calculation or carryforward strategy. Thanks to everyone who's shared their real-world experiences - this is exactly the kind of practical guidance that's hard to find elsewhere!

This is exactly the kind of situation where getting the timing right is crucial! I went through a similar manufacturing business acquisition two years ago and initially made the same assumption about using the purchase agreement date. What I learned (the hard way, after having to amend our documents) is that the IRS is very specific about when a debt instrument is considered "made." The key regulation is Section 1274, which clearly states that the AFR applies based on when the debt obligation actually comes into existence - not when you agree to create it later. In your case, since you're doing seller financing, the promissory note and actual loan don't exist until closing when funds are exchanged and the note is signed. At that point, you can use the AFR from the closing month or any of the three preceding months, giving you four options to choose from. One practical tip: track the AFR rates monthly leading up to your closing so you can make an informed choice. The IRS publishes these rates monthly, and they can vary significantly. We saved about 0.3% on our loan by using the AFR from two months prior to closing instead of the closing month rate. Also make sure your attorney includes the specific AFR reference and date in the promissory note itself - something like "Interest shall accrue at 4.25% per annum, being the long-term Applicable Federal Rate for [specific month/year] as published by the Internal Revenue Service." This documentation becomes very important for tax reporting purposes. Good luck with your acquisition! Manufacturing businesses can be complex but very rewarding when structured properly.

This is a really common source of confusion, and you're smart to get clarity before closing! I dealt with this exact issue when I bought my small business two years ago. The key thing to understand is that the AFR applies when the loan is actually "made," which legally happens at closing when the promissory note is executed and funds are disbursed - not when you sign the purchase agreement. The purchase agreement is just a contract to buy; the actual debt instrument doesn't exist until closing. This actually works in your favor because it gives you flexibility. You can use the AFR from the closing month OR any of the three months prior to closing. So if you close in May, you could choose from February, March, April, or May's AFR - whichever is most favorable. A few practical tips from my experience: - Document your AFR selection clearly in the promissory note with language like "interest at 4.2% per annum, being the long-term AFR for April 2025" - Track the monthly AFR rates leading up to closing so you can make an informed choice - Consider adding language to your purchase agreement that preserves your right to select any AFR within the allowable window in case closing gets delayed The 0.5% difference you mentioned could be substantial over the life of the loan, so it's definitely worth getting this right. Your attorney is correct that either approach could work, but using the closing date (or months prior) is the technically correct interpretation under IRS regulations.

I'm just starting my VITA certification journey and this thread has been incredibly helpful! I'm a bit nervous about the time commitment - between my regular coursework and part-time job, I'm trying to figure out the best way to structure my study schedule. For those who've completed the certifications, would you recommend tackling all three tests (Standards of Conduct, Intake/Quality Review, and Basic) in the same week, or spacing them out? Also, I keep seeing mentions of the Link & Learn system being unreliable - should I plan for technical difficulties and maybe start earlier than my actual deadline? Really appreciate everyone sharing their experiences and tips. It's reassuring to know that 100% is achievable with proper preparation!

This is such a comprehensive thread - thank you all for sharing your experiences! I'm currently preparing for my VITA certification and feeling much more confident after reading through everyone's tips. One question I haven't seen addressed yet: Are there any specific areas where the 2025 tax law changes have impacted the certification test content? I know there were some updates to the Child Tax Credit and EITC provisions, and I want to make sure I'm focusing my study time on the most current information. Also, for those who used the tabbing strategy mentioned earlier - do you have recommendations for which specific sections of the publications to tab? I'm thinking of color-coding different topics but want to make sure I'm not overdoing it and making my reference materials harder to navigate during the actual tests. Really appreciate this community sharing so much practical advice. It's making the whole certification process feel much more manageable!