Thank you for this suggestion! We did replace the roof about 7 years ago (around $11,000) and installed central air conditioning (about $8,500) about 5 years ago. We also replaced all the windows about 9 years ago for around $6,500. I don't think our tax person asked about any of this specifically. Would these count as improvements that could help reduce our tax bill? And if so, do we need receipts or some kind of proof, because honestly I'm not sure if we kept all of that paperwork.

Yes, all of those would absolutely count as capital improvements that increase your cost basis! The roof, HVAC, and windows are all classic examples of capital improvements rather than repairs. Even without receipts, you can still claim these improvements, though documentation is preferred. If you don't have receipts, try to gather whatever evidence you can - canceled checks, credit card statements, emails with contractors, or even photos showing the before and after. You could also get estimates from contractors showing what similar work would have cost in those years as supporting evidence. These improvements total around $26,000, which could significantly reduce your tax bill. Definitely bring this information to your tax preparer right away or consider getting a second opinion from a CPA who specializes in real estate taxation.

This is an important point - loan amount doesn't impact basis, but if the loan proceeds were used for property improvements, those DO increase basis. I made this mistake on my first rental and it cost me thousands.

I actually tried that initially! The company said they don't report these credits anywhere because they consider them "promotional incentives" rather than compensation. They told me it was my responsibility to determine the value and report it correctly. That's exactly why I'm so confused about how to handle it.

That's definitely making things more complicated then. In that case, I would document everything carefully - when credits were earned, their approximate cash value, and how you calculated that value. The fact that the company calls them "promotional incentives" doesn't change your tax obligations, but it does make record-keeping more important. If you're self-employed, these would still be business income on Schedule C. Consider consulting with a tax professional who specializes in self-employment or sales compensation structures to ensure you're covered.

This is actually really good advice. If you're tracking the credits as income when earned, then using them for legitimate business expenses later, you should be able to deduct those expenses when incurred. Just make sure you're not double-counting!

17 Is that also true if you're leasing the car? My tax software is asking for all this info but I don't own my vehicle.

3 For leased vehicles, it works differently. You generally can't claim depreciation or Section 179 on a leased vehicle because you don't own it. Instead, you can deduct the business portion of your lease payments as a business expense. You still need to track your business vs. personal use percentage, but you'll apply that percentage to your lease payments rather than calculating depreciation. The "date placed in service" would still be when you first started using the leased vehicle for business purposes, but it's used differently in your tax calculations.

2 I use Stride. It's free and automatically tracks your miles while you drive. You can categorize trips as business or personal, and it calculates your potential tax deduction based on the current IRS mileage rate. It also lets you track other expenses like car washes, phone bills, etc. Been using it for 2 years now and it makes tax time way easier.

I'm honestly not even sure if I paid AMT when I exercised these. How would I know? Would it have been obvious on my 2023 return or is this something that could have happened without me realizing it?

Check your 2023 tax return for Form 6251 (Alternative Minimum Tax). If you paid AMT, it would show up there and on line 1 of Schedule 2 of your Form 1040. If you did pay AMT in 2023 when you exercised, you'll likely be eligible for an AMT credit on your 2025 return (for the 2024 tax year when you sold). You'll need to file Form 8801 (Credit for Prior Year Minimum Tax) along with your return. This credit can potentially offset some of the tax impact from your disqualifying disposition.

Yep, this happened at my last job too. But be careful - some companies mess up the reporting on disqualifying dispositions. My employer reported the wrong amount on my W-2 (they used the sale price instead of FMV at exercise for calculating the ordinary income). Had to get an amended W-2 which was a huge hassle. Double-check your W-2 when you get it!

That's really helpful! I have done some work on the property - replaced the roof and updated the electrical. Would those count? And do I need any special documentation beyond the receipts?

Yes, a new roof and electrical updates definitely count as capital improvements that can be added to your basis! Keep all receipts, contracts, and if possible, before and after photos of the work done. For substantial improvements like these, it's also good to have the contractor invoices that detail the work performed, not just the payment receipts. The IRS wants to see that these were actual improvements that extended the life or value of the property, not just repairs or maintenance.

This is actually pretty risky advice. Seller financing means you don't get all your cash upfront, which defeats the OPs purpose of paying off debt and buying another house. Plus you take on the risk of buyer default. There are better ways to manage the tax situation.