Would this be the same for a situation where the insurance company sent a check for property damage rather than lost rent? I received a check for roof damage but it was made out to both me and my mortgage company.

No, that's actually quite different. Insurance payments for property damage (like your roof) are generally not taxable income - they're considered reimbursement for capital expenses. However, if the insurance payment exceeds your basis in the damaged property component, you might have to recognize gain. The situation gets more complex when the check includes your mortgage company. Typically, mortgage companies are included on insurance checks for significant property damage to ensure the repairs are actually completed. This doesn't change the tax treatment - it's still not income - but you'll need to work with your mortgage company to get the funds released for the actual repairs.

Wait so if the 1099-NEC is for lost rental income is it considered passive income? I thought anything on a 1099-NEC is automatically considered self-employment income subject to SE tax?

That's a really common misconception! The 1099-NEC form itself doesn't determine whether income is subject to self-employment tax - the nature of the income does. In this case, despite being on a 1099-NEC, the payment is essentially replacement rental income, which is generally considered passive income reported on Schedule E and not subject to self-employment tax. The insurance company probably issued a 1099-NEC because they didn't have a more appropriate form for this type of payment, but that doesn't change its fundamental nature as replacement for rental income. When you report it on Schedule E along with your other rental activities, you're correctly characterizing it based on what it actually represents rather than just the form it came on.

Curious - how much more does a CPA typically charge compared to H&R Block?

It varies a lot based on complexity. When I just had W-2 income, my CPA charged about $350 compared to roughly $200 at H&R Block. Now with rental property and some business income, I pay about $750. The difference has been worth it though - my CPA found nearly $3,000 in deductions H&R Block missed the year before I switched. CPAs generally have more education and expertise, especially with complex situations. If your taxes are super simple, the price difference might not be justified, but with any complexity, a good CPA usually pays for themselves.

Thanks for sharing! How did you find your CPA? I'm nervous about just picking someone random.

Thanks for bringing this up! I actually wasn't sure about Form 8833. Does everyone claiming treaty benefits need to file this form? The treaty amount isn't huge (around $6,500 total income with $1,950 withheld), so I wasn't sure if there's some minimum threshold.

Technically, not everyone needs to file Form 8833. There are exceptions based on the type of income and amount. Generally, if your treaty-based position is already disclosed on a W-8BEN form you submitted to the payer (which would normally be the case for standard treaty reductions on things like royalties, dividends, etc.), you might be exempt from filing Form 8833. However, there are specific situations that always require Form 8833 regardless of amount, such as certain business profits claims or if you're taking a position that's contrary to a U.S. regulation. In your case with $6,500 income and standard treaty withholding reduction, you might be exempt, but most tax professionals recommend filing it anyway to be safe. The penalties for not filing when required can be quite steep ($1,000 per position), so the safe approach is to include it.

This is actually incorrect information. The June 15th deadline is for US citizens and resident aliens living abroad, not for nonresident aliens. The 1040-NR is generally due on April 15th for most filers (or the next business day if it falls on a weekend or holiday).

You're right, I mixed up the rules. Thanks for the correction! Nonresident aliens filing Form 1040-NR generally need to file by April 15th (or the next business day if it falls on a weekend or holiday) for the previous tax year. The June 15th deadline applies to U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico. The important point still stands though - even if you missed the deadline, you can still file and claim a refund for up to 3 years from the original due date of the return.

What exactly counts as "active participation"? I handle most of the management stuff - finding tenants, dealing with maintenance calls, etc. But my brother handles most of the actual repair work. Do we both qualify?

Active participation is less stringent than material participation. For active participation, you need to make management decisions like approving tenants, deciding on rental terms, approving repairs, etc. You don't necessarily need to do the physical work yourself. Based on what you described, you would likely qualify since you handle the management aspects. Your brother would also likely qualify since he's involved in the actual maintenance work. Keep good records of the time you both spend and the decisions you make related to the properties. A simple log with dates and descriptions of rental-related activities is usually sufficient.

Is the QBI deduction still available? I thought that was part of the TCJA that was expiring soon?

That's a good point about the support test. They definitely covered more than half my expenses for 2024 (rent, groceries, car insurance, etc.). I'll make sure to talk to them before we file. Do you know if there's a specific form or calculation to determine exactly what counts as "support"?

There's no specific form for calculating support, but the IRS does have guidelines. Support includes food, housing, clothing, education, medical expenses, transportation, and recreation. For housing, you calculate the fair rental value of the space provided plus utilities. Keep in mind that scholarships don't count as support you provided for yourself. Also, any loans you took out yourself do count as support you provided, but loans your parents took out count as support from them.

I used TurboTax last year when I was in a similar situation. It asks you specific questions about your living situation, income, and who provided support. It was pretty straightforward and determined my correct status. If you're still unsure after using it, they have tax pros you can talk to, though that costs extra.