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Don't forget to check if you qualify for the Education Savings Bond Program exclusion! If you use your savings bonds to pay for qualified higher education expenses, you might be able to exclude all or part of the interest from your income. There are income limits though, and it only applies to Series EE bonds issued after 1989 or Series I bonds. You'd need to file Form 8815 with your tax return. Saved me over $300 in taxes last year!
Does this education exclusion work if the bonds were originally purchased by my parents but in my name? I just cashed some to pay for my masters program.
Yes, it can work in your situation! What matters is who the owner of the bond is (whose name is on it) when it's redeemed, not who purchased it. If the bonds are in your name and you're using them for your qualified education expenses, you can claim the exclusion. Just make sure you're meeting all the requirements: the bonds must have been issued after 1989, you must be at least 24 years old when the bonds were issued, and the bonds must be redeemed in the same tax year you pay the education expenses. Also, your income needs to be below certain thresholds to get the full benefit. Form 8815 will walk you through all of this.
Does anyone know if you can just pay the taxes on savings bonds interest over time? I cashed out about $15,000 in old bonds from my grandparents and the interest portion is huge - almost $7,000! There's no way I can pay all that at once.
Don't forget about retirement accounts for self-employed people! I didn't know about this my first year and missed out on huge tax savings. Look into a SEP IRA or Solo 401k - you can contribute way more than regular IRAs and it reduces your taxable income. At $12k, you could potentially put away about $2200 (that's roughly 18.6% of your net profit after deducting the employer half of SE tax). This lowers both your income tax AND self-employment tax hit.
I had no idea this was even an option! Do you just set these up yourself or do you need an employer to do it? And is there a deadline to open one?
You set it up yourself! Since you're self-employed, you're both the employer and employee for retirement purposes. For a SEP IRA, you can open one online through places like Vanguard, Fidelity, or Schwab in about 15 minutes. For the deadline, you can actually open and fund a SEP IRA up until your tax filing deadline - including extensions. So for 2024 taxes, you have until April 15, 2025, or if you file an extension, all the way until October 15, 2025. This is super helpful because you can calculate your exact tax situation before deciding how much to contribute. The Solo 401k has slightly different rules and deadlines, but the SEP is probably simplest for your situation.
Anyone have recommendations for tracking expenses throughout the year? I'm terrible at keeping receipts and end up scrambling at tax time. Is there an app thats good for self-employment tracking?
I use QuickBooks Self-Employed and it's been a lifesaver. It connects to your bank accounts and PayPal, automatically categorizes expenses, tracks mileage, and calculates quarterly taxes. Costs like $15/month but worth every penny for the headache it saves at tax time.
Just a heads up - make sure you double check the cost basis on that 1099-B before filing your amendment. Sometimes brokerages report the proceeds but leave the cost basis blank or incorrect, which makes your capital gains look WAY higher than they actually were. This happened to me and I almost overpaid by thousands. Form 8949 is your friend here - you can report the correct cost basis even if it's wrong or missing on the 1099-B. Just make sure you have documentation to back it up (like purchase confirmations or statements showing when you bought the securities).
Thanks for mentioning this! Just checked my 1099-B and you're right - the cost basis is completely missing for two of the transactions. Do I need to contact my brokerage to get this corrected or can I just fill in the correct amounts on Form 8949?
You can fill in the correct cost basis directly on Form 8949 yourself - you don't need to wait for a corrected 1099-B. Just use code "B" in column (f) to indicate that you're reporting a cost basis different from what's on your 1099-B. Keep all your records showing the actual purchase price in case you're ever audited. Even a printout of your transaction history from your brokerage account can work as documentation. The IRS understands that cost basis issues are common, especially with older investments or when securities transfer between brokerages.
Has anyone used the IRS Free File Fillable Forms for amending? I'm in a similar situation but don't want to pay for tax software just to file an amendment.
Free File Fillable Forms don't support amended returns (1040-X) unfortunately. I tried going that route last year. You either have to print and mail a paper amendment or use commercial software. Some tax software has free amendment options if you filed your original return with them, might be worth checking.
Don't forget about prorating your expenses for the year you converted the property! If you converted your home to a rental in July, you can only deduct expenses from July-December. This includes property taxes and mortgage interest - you'd claim the first half of the year on Schedule A if you itemize, and the second half on Schedule E. Also, keep track of "startup expenses" when converting to a rental - things like advertising costs, credit check fees for tenants, etc. These have specific rules for deductibility.
Thanks for bringing up the prorating - I converted in September, so that's really helpful. For the startup expenses, is there a limit to how much I can deduct in the first year? And what about the lawn mower and tools I bought specifically for maintaining the rental?
You can deduct up to $5,000 in startup expenses in your first year, with amounts above that amortized over 15 years. But these are specifically business startup costs like advertising, not equipment. For the lawn mower and tools, those are considered assets used for your rental activity. You can either depreciate them over their useful life (usually 5-7 years) OR you might qualify for Section 179 expensing or bonus depreciation to deduct them immediately. It depends on your specific situation and the total amount spent. Small tools under $200 each can generally be expensed immediately regardless.
Anyone know if I can deduct rental losses against my regular income? I have a similar situation with a rental property that's currently operating at a loss but I have a good W-2 job.
You might qualify for the $25,000 special allowance for rental losses if your modified adjusted gross income is under $100,000 and you "actively participate" in rental management. This phases out entirely once your MAGI hits $150,000. If your income is higher, your losses are suspended until you either have passive income or sell the property.
Sergio Neal
Something people often miss with RSUs is that your broker might not always have the correct cost basis information, especially if you've changed employers or if the company has gone through a merger. Always double-check! In my case, after changing jobs, my old RSUs showed up in my new brokerage account with a cost basis of $0, which would have meant paying taxes on the ENTIRE amount when selling. Had to manually adjust the cost basis using my old vesting statements. Took hours but saved me thousands in incorrectly calculated taxes.
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Savanna Franklin
ā¢How do you manually adjust cost basis? I think I might be in this exact situation but I have no idea how to fix it. My broker's website is confusing and when I called customer service they weren't helpful at all.
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Sergio Neal
ā¢Most brokerages have a section where you can adjust or enter cost basis information for your holdings. Look for something like "Update Cost Basis" or "Adjusted Cost Basis" in your account settings or portfolio section. You'll typically need to enter the acquisition date and price per share from your vesting documentation. If you can't find it online, call your broker again but specifically ask for their "cost basis department" - regular customer service reps often don't know how to handle these adjustments. Have your vesting statements ready showing the FMV (fair market value) on your vesting dates. If they're still not helpful, you can report the correct basis directly on your tax return using Schedule D and Form 8949, making sure to check the box indicating that the basis reported to the IRS was incorrect.
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Juan Moreno
One big gotcha with RSUs that nobody mentioned: watch out for supplemental wage withholding! When RSUs vest, companies typically only withhold at the supplemental rate of 22% (or 37% for amounts over $1 million). If you're in a higher tax bracket, this creates a HUGE tax bill surprise at filing time. I learned this the hard way when I had to come up with an extra $9,600 at tax time because my company only withheld 22% but I was in the 35% bracket. Now I set aside an additional 13% of each RSU vesting value in a separate savings account specifically for tax time. Painful lesson!
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Amy Fleming
ā¢Exactly right. I recommend people make estimated tax payments each quarter after significant vestings to avoid penalties too. I messed this up one year and got hit with underpayment penalties on top of the extra tax!
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