This is really good timing information! I didn't realize the Section 121 exclusion had a two-year waiting period between uses. That's definitely something to keep in mind for future planning. Quick follow-up question - if someone doesn't meet the full 2-year ownership requirement but qualifies for a partial exclusion due to unforeseen circumstances (like a breakup), does that partial use still trigger the two-year waiting period? Or can they potentially use the full exclusion sooner if they meet all requirements on a future sale? Also, regarding Illinois state requirements - I found that Illinois doesn't have a separate capital gains tax, so whatever exclusion applies federally should work for state taxes too. But definitely worth double-checking with a local tax professional since property transfer rules can vary by county.

@Freya Thomsen Great question about the partial exclusion and waiting period! Yes, even using a partial Section 121 exclusion still triggers the full two-year waiting period before you can use it again. The IRS doesn t'prorate the waiting period based on how much of the exclusion you used - it s'an all-or-nothing rule. So if you use any portion of the exclusion in 2025 even (just a partial one due to unforeseen circumstances ,)you wouldn t'be eligible to use it again until 2027, regardless of whether you meet all the requirements on a future sale. This makes it even more important to carefully consider the timing if you re'planning any major life changes. If you think you might need to sell another property in the next couple years, you might want to weigh whether it s'worth using the exclusion now or paying the capital gains tax and preserving the exclusion for a potentially larger gain later. You re'absolutely right about Illinois following federal treatment - no separate state capital gains tax makes this much simpler than in states like California or New York where you d'have additional state-level considerations.

This is excellent comprehensive advice! I'm in a very similar situation right now - my partner and I are splitting up after 2.5 years of homeownership, and I was feeling pretty overwhelmed by all the moving pieces. The point about getting a formal appraisal really resonates with me. We were initially going to just use Zillow estimates to avoid the cost, but you're absolutely right that having an official, defensible valuation is worth the $500. Especially in a breakup situation where emotions can run high, having that neutral third-party assessment removes any potential for disagreement down the road. I hadn't thought about the timing implications with the Section 121 exclusion either. Since I'm planning to potentially relocate and buy again within the next year or two, I need to factor in that two-year waiting period. It's good to know this now rather than be surprised by it later. One question - when you mention keeping receipts for improvements, how detailed did you get? Like, are we talking about every single Home Depot receipt, or just major projects? I'm trying to figure out what level of documentation is actually necessary versus overkill. Thanks for sharing your experience - it's really helpful to hear from someone who's been through this process successfully.

@Oliver Wagner Great question about the documentation level! From my experience, you want to keep receipts for anything that could reasonably be considered a capital improvement, but you don t'need to go overboard. Focus on major items that clearly add value or extend the property s'useful life: new flooring, appliances, HVAC work, roof repairs, bathroom/kitchen renovations, new windows, etc. I kept receipts for anything over about $200 that wasn t'routine maintenance. For smaller items, I created a simple spreadsheet tracking the date, expense, and brief description. Things like new light fixtures, ceiling fans, or upgraded hardware can add up, but individual $20 purchases probably aren t'worth the hassle unless they re'part of a larger project. The key is being able to demonstrate that you made reasonable efforts to track improvements. The IRS isn t'expecting you to have every single receipt from 3 years of ownership, but having organized records for the significant stuff shows you re'being diligent. One tip: if you did any DIY projects, keep receipts for materials but also document your work with before/after photos. While you can t'claim your labor costs, having visual evidence of improvements can be helpful if questions arise. Good luck with your situation! The fact that you re'thinking about this proactively puts you in a much better position than many people in similar circumstances.

I used H&R Block for my father's estate - NOT worth it. The software didn't clearly explain the difference between estate income and principal distributions. I ended up consulting with an accountant anyway who told me I didn't even need to file most of what the software was prompting me for. For a simple estate, I'd just file Form 1041 directly or consult briefly with an accountant rather than using software.

This is really comprehensive advice, thank you! I'm new to handling estate matters and had no idea about the "final accounting" purpose of Form 1041. That makes so much more sense now why it would be recommended even with no income to report. Quick question about the final closing letter from the bank - is this something I need to specifically request, or do they typically provide it automatically when closing an estate account? I want to make sure I don't miss getting that documentation before we finish everything up. Also, when you mention keeping records of date-of-death appraisals versus sale prices, how long should those be retained? Is there a specific timeframe the IRS could potentially ask for these documents?

This is really helpful timing info! I had no idea about the December/January timing issue. Quick follow-up question - if I have losses throughout 2024 but then hit a big win in late December that puts me net positive for the year, do I still need to report all the individual winning sessions from earlier in the year as income? Or can I just report the net amount? I'm trying to figure out if I need to go back and reconstruct every single bet I made this year or if the year-end summary from DraftKings is sufficient for tax purposes.

Unfortunately, you need to report ALL gambling winnings as income, not just your net amount. Each winning session/bet is considered separate taxable income, even if you had losses on other days that offset those wins. So yes, you'd technically need to report all those individual winning sessions from throughout the year as income on your tax return. The good news is that if you itemize deductions, you can then deduct your gambling losses up to the amount of your winnings on Schedule A. The year-end summary from DraftKings is helpful for your records, but for tax purposes you're supposed to report the gross winnings amount. Many people do use the summary as a reasonable approximation, but technically the IRS wants you to track each winning session. This is why keeping detailed records throughout the year (or using something like those tax tools others mentioned) can be really valuable. It's one of those areas where the tax code is pretty strict in theory, but enforcement varies in practice for casual recreational bettors.

This is super helpful clarification! I think the distinction between individual bet thresholds vs annual cumulative reporting is what was confusing me the most. So just to make sure I understand correctly - even if none of my individual bets trigger a W-2G, I could still get a 1099-MISC at year-end if my total profits exceed $600? And regarding state requirements, do you know if there's an easy way to find out what my specific state's thresholds are? I'm in Illinois and wondering if they have different rules since they legalized sports betting relatively recently.

I'm in Florida which uses the federal marketplace, so I don't think there are any state-specific programs that would help me. But that's a good tip for others who might be in states with their own marketplaces! I've been researching this more and it looks like my best option is to carefully document my income changes on Form 8962 and hope I qualify for one of the repayment caps. My total income for the year will definitely be under 400% FPL, so at least there should be some limit to how much I have to pay back.

This is really helpful to hear from someone who's been through the same situation! I'm definitely feeling less panicked now knowing there are repayment caps. Quick question - when you filled out Form 8962, did you need any special documentation to prove your unemployment period and when you started your new job? I want to make sure I have everything ready in case the IRS asks for verification of my income changes throughout the year. Also, do you remember roughly what percentage of your credits you ended up having to repay? I'm trying to get a sense of what to expect so I can plan accordingly.

This is actually good advice. I did something similar with a restaurant job. Just approached it from the "I need documentation for my apartment" angle rather than "you're breaking tax law" and my boss was surprisingly accommodating. Worth a try before going the self-reporting route.

This is really helpful, thank you! Quick question about the estimated tax payment - how do I calculate what I should pay for Q4? I've been making $850/week since April, so that's about $29,750 so far. Should I just estimate 25-30% of that? And do I need to do anything special to tell the IRS this is for estimated taxes vs regular tax payment?