Something to consider - you might also want to look at tax-loss harvesting before year-end to potentially lower your MAGI. If you have any investments with unrealized losses, selling them could offset some of your gains and potentially get you under the threshold.

Just to add another perspective - if you're really close to the income limits, you might also want to consider maximizing your 401(k) contributions if you haven't already. Traditional 401(k) contributions reduce your AGI (and therefore your MAGI), which could potentially bring you back under the Roth IRA phase-out range. For 2025, you can contribute up to $23,500 to a 401(k) ($31,000 if you're 50 or older). Even if you can't max it out completely, every dollar you contribute reduces your MAGI dollar-for-dollar. This strategy works especially well if your employer offers matching contributions too.

This is such a timely question - I just went through this exact same situation with a deck replacement last fall! Based on my experience and what I learned from my CPA, here are a few additional considerations: **Timing matters for your records**: Since you mentioned paying half now and half upon completion, make sure to get itemized invoices for both payments. The IRS likes to see a clear paper trail, and having detailed invoices (not just cancelled checks) makes everything cleaner if you ever need to prove the expense. **Consider the "betterment" test**: The fact that you're upgrading to composite materials is actually really important here. The IRS looks at whether you're making the property "better" than it was before, and composite vs. pressure-treated wood clearly passes that test. This helps distinguish your project from a simple repair. **Don't forget about disposal costs**: If your contractor is charging separately for hauling away the old deck materials, that cost can also be added to your basis as part of the improvement project. It's all part of the cost of putting the new deck in place. One last tip - create a simple spreadsheet now with columns for date, description, amount, and vendor. Update it as you make payments and add any related costs (permits, site prep, etc.). Future you will thank present you for staying organized! Good luck with the project - composite decking is such a game-changer compared to the old wood maintenance nightmare!

One thing I haven't seen mentioned yet is keeping detailed photos throughout the entire process! I just completed a similar deck replacement project and my tax advisor emphasized the importance of visual documentation at every stage. Take photos of: - The deteriorated condition of your old deck (showing why repair wasn't feasible) - The demolition process - The new construction materials being delivered - Work in progress shots - The completed project This creates a complete visual timeline that supports your improvement classification. I organized mine in a folder labeled "2025 Deck Replacement" with dates in the filenames. It's incredibly helpful to have this visual proof that you completely replaced the structure rather than just fixing parts of it. Also, since you're planning to stay in the house for 10+ years, consider starting a "Home Improvements" binder now with sections for each major project. Include all contracts, receipts, permits, photos, and any correspondence with contractors. When you eventually sell, you'll have everything organized in one place instead of hunting through years of files. The composite decking choice is excellent - we did the same upgrade and the difference in maintenance is incredible. No more annual staining! That alone helps justify the improvement classification since you're enhancing both the value and functionality of the property.

This is exactly the kind of detailed discussion I was hoping to find! As someone who's been wrestling with similar non-resident tax issues, I want to add that timing can be crucial when it comes to IRA distributions and tax treaties. If you're planning distributions across multiple tax years, it's worth considering how changes in tax treaty provisions or your residency status might affect the taxation. Some people don't realize that if you become a resident alien again in the future, the tax treatment of your IRA distributions will revert to the standard US resident rules. Also, for those dealing with required minimum distributions (RMDs) as non-residents, the same FDAP treatment applies, but you'll want to make sure you're calculating the RMDs correctly since the IRS doesn't send reminder notices to non-resident addresses. Missing an RMD can result in hefty penalties regardless of your residency status. One last tip - keep detailed records of all your IRA basis if you've made any non-deductible contributions over the years. The IRS expects you to track this properly even as a non-resident, and Form 8606 becomes even more important when you're dealing with treaty benefits and foreign tax credits.

This thread has been incredibly informative! I'm in a similar situation as a non-resident dealing with IRA distributions, and I wanted to share something that might help others. One thing I learned the hard way is that if you have multiple IRAs (traditional and Roth), you need to be extra careful about which accounts you're taking distributions from and how they're reported. The custodians don't always get the tax reporting right for non-residents, especially when it comes to applying treaty benefits. I had a situation where my 1099-R showed federal tax withheld at 30%, but I was actually eligible for a 15% rate under my country's tax treaty. Getting that corrected required filing Form 843 to claim a refund of the excess withholding, which took months to process. My advice: before taking any distributions, contact your IRA custodian to confirm they have your correct tax treaty status on file and will withhold at the proper rate. It's much easier to get it right upfront than to chase refunds later. Also, consider timing your distributions strategically if you're planning to change your residency status in the near future, as this could significantly impact the tax treatment.

Have you considered whether it might be easier to just dissolve the S-Corp entirely? Since it's just holding investments, you could potentially move everything to a single-member LLC or even just hold the investments personally. I had a similar "dormant" S-Corp I was maintaining for years and eventually realized I was spending more on annual filing fees and tax prep than I was gaining from any tax advantages.

This is a really nuanced situation that highlights an important distinction many people miss about S-Corp reasonable compensation rules. Since your entity is truly passive with no services being performed, you're likely in good shape to take distributions without salary. The key is documentation. I'd suggest drafting corporate minutes that clearly state: (1) the corporation was formed solely as a passive investment vehicle, (2) no shareholder services are performed that would warrant compensation, and (3) all income is derived from passive investments requiring no labor or expertise. One practical tip - consider taking distributions gradually rather than all at once. This creates less of a "red flag" appearance and gives you time to see how the IRS responds to your tax filings. Also, make sure your distributions don't exceed your stock basis, as anything over basis becomes taxable as capital gains. Given the complexity and the dollar amounts involved, you might want to run this by a tax professional who specializes in S-Corp issues. They can review your specific fact pattern and help ensure you're documenting everything properly to support your position if questioned.

Thank you all SO MUCH for the explanations! I see exactly where I went wrong now. I was applying the phaseout percentage to the total interest paid ($4,200) rather than to the maximum allowable deduction ($2,500). So the correct calculation is: 1. Cap the interest at $2,500 2. Calculate the phaseout: $2,500 × 0.233 = $583 3. Deduction after phaseout: $2,500 - $583 = $1,917 That's closer to the $1,667 option than any other choice, which explains why my answer was marked wrong. The test might have used slightly different rounding or a different phaseout range for the year. I feel a bit silly now because looking back at the IRS instructions, it does clearly state to apply the phaseout to the lesser of the actual interest or $2,500. I guess I was overthinking it!

This is such a great example of why tax education is so important! As someone who's been helping community members with tax questions for years, I see this exact confusion about student loan interest deductions all the time. The key takeaway here is that the IRS applies income-based phaseouts to the MAXIMUM allowable deduction amount, not to what you actually paid. This principle applies to many other tax benefits too - like the child tax credit, education credits, and retirement account contribution deductions. One tip for anyone studying for tax assessments or certifications: when you see a phaseout calculation, always ask yourself "what is the base amount being phased out?" It's usually the maximum benefit amount, not the underlying expense. And @AstroAdventurer, don't beat yourself up about this! The fact that you're taking the time to understand where you went wrong shows you'll be an excellent tax professional. These kinds of detailed calculation questions are designed to test your understanding of the nuances in tax law.