Did your accountant say anything about carpet, window coverings, or light fixtures? I want to separate those out too but not sure if those count as "obvious" enough without a study.

My accountant said carpet and window coverings are definitely separate from the building structure and can be depreciated over shorter periods (carpet is 5 years, window coverings 7 years I believe). Light fixtures are a bit more of a gray area - some are considered part of the building while decorative or specialty fixtures might qualify as personal property. He recommended documenting higher-end light fixtures separately but leaving basic fixtures as part of the building.

You use the fair market value at the time of conversion to rental use, not the original purchase price. For a 10-year-old stove, that fair market value would be significantly less than what you paid for it new.

Do you know if property management time counts toward the 750 hours? I spend about 10 hours a week managing our rentals, but I'm not sure if that's enough to qualify.

Yes, property management time absolutely counts toward the 750 hours requirement, so your 10 hours weekly would give you about 520 hours annually. However, that alone wouldn't reach the 750-hour threshold. The bigger issue is that you also need to spend more than half your total working time on real estate activities to qualify as a real estate professional. So if you have a full-time job outside of real estate (say 2,000 hours/year), your 520 hours of property management wouldn't meet the "more than half" test. This is why it's often easier for one spouse to qualify if they're primarily focused on real estate activities.

How do you determine the split between land and building value for depreciation purposes? My county tax assessment breaks it down, but I've heard that's not always the best method.

Thanks for the insider perspective! So would you recommend I just go with my simplified approach for this year since I'm claiming less of a loss than I'm entitled to? Or should I spend the extra money to have everything properly documented transaction by transaction?

If you're claiming less of a loss than you're entitled to, from a practical risk perspective, you're unlikely to face issues. However, from a compliance standpoint, you should report transactions accurately. My recommendation would be to consider using specialized crypto tax software that can handle the volume of transactions correctly rather than manually simplifying. It would give you proper documentation if questions ever arise, and you'd get your full allowable loss. The peace of mind is often worth the investment, especially if you continue crypto trading in future years.

This! It's like getting pulled over by a cop even when you're not speeding. Your heart still races because you start second-guessing everything. "Did I signal that lane change? Is my registration current? Is there a taillight out I don't know about?"

How would the IRS even know about Zelle payments though? Does Zelle report to the IRS? I thought these payment apps were private.

The IRS might not automatically see every Zelle transaction, but that doesn't mean you're invisible. Banks are required to report patterns of transactions, especially ones that look like potential income. Plus, if you get audited for any reason, they can request your bank records. Starting in 2025, payment apps have increased reporting requirements for certain types of transactions. While genuine gifts aren't reportable income, large regular payments might trigger questions. It's always about the nature of the payment, not the method. If these are truly gifts for medical expenses, keep documentation showing that's the case. The IRS has sophisticated methods to identify unreported income, even from digital payments.

Is that true even if the money goes to the person first and then they pay the medical bills? Or does it have to go directly to the hospital/doctor?

Thanks for sharing this cautionary tale. Did your colleague have detailed documentation of his real estate hours? I'm tracking everything meticulously with time-stamped entries, photos of site visits, and all communication logs. I'm wondering if his documentation was lacking or if the IRS just fundamentally rejected the premise regardless of his records.

He had documentation but it wasn't detailed enough. He used a basic spreadsheet with daily totals rather than itemized activity logs. The IRS wanted to see specific activities broken down by property, with supporting evidence like emails, contracts, and receipts that matched the claimed activities. The biggest issue was that his W-2 contract stated "full-time employment" even though he claimed to only work 20-25 hours weekly. The IRS defaulted to assuming at least 40 hours for his W-2 job, which made qualifying for REPS mathematically impossible in their view. If you've formally reduced your contract to 20 hours and have documentation from your employer confirming this arrangement, you're in a much better position than he was.

Yes, my brother-in-law successfully passed an audit while claiming real estate professional status with a W-2 job. The key was that he had negotiated his employment contract down to 15 hours weekly (documented), works remotely, and kept incredibly detailed records of his real estate activities including video logs of property visits and time-stamped communications with tenants/contractors. He also had a legitimate real estate business structure with separate bank accounts, business cards, website, etc. The IRS initially questioned his status but ultimately accepted it after reviewing his documentation. But he literally had 800+ pages of supporting documents!

Thank you! This is exactly what I was looking for. So my original confusion makes sense - there's the contribution limit ($7000) which is what most sites talk about, and then there's the deduction limit based on MAGI which is much lower when you have a workplace plan. Do you know where in the tax form this gets reported? Is there a specific worksheet for calculating the partial deduction in the phaseout range?

You're welcome! Yes, that's the exact distinction that trips up so many people. The $7000 is just how much you can put in, not necessarily how much you can deduct. For calculating the partial deduction in the phaseout range, there's a worksheet in Publication 590-A called the "IRA Deduction Worksheet." Most tax software will do this calculation automatically, but if you want to do it yourself, that's where to find it. Basically you determine what percentage of the phaseout range you fall in, and then reduce your maximum deduction by that percentage. On your tax form, the IRA deduction goes on Schedule 1, Line 20 of Form 1040 (though line numbers sometimes change year to year). The calculation itself doesn't appear on the form - just the final deduction amount.

This is what I do! I'm exactly in that zone where I can't deduct traditional IRA contributions but can still contribute to a Roth. The math works out better in the long run anyway assuming tax rates stay similar or go up.

That's great! You've found the sweet spot. For many people in this income range, the Roth often makes more mathematical sense anyway - especially if you believe tax rates will be higher in the future than they are now. Another advantage is that Roth IRAs don't have Required Minimum Distributions (RMDs) like traditional IRAs do, so they give you more flexibility in retirement for managing your tax situation.

I was only on H1B, never had a green card, so I think I don't fall into the covered expatriate category. But that's an important point for others in similar situations who might have different visa histories.

Yes, you'll need to file Form 1040NR (U.S. Nonresident Alien Income Tax Return) to claim back any overwithholding. Be sure to attach a copy of your W-8BEN and a statement explaining why the reduced treaty rate should apply. I did this last year and got my refund after about 6 months.

Thanks for the info! 6 months is a long time but better than nothing I guess. Did you have to provide any additional documentation beyond the W-8BEN and statement?

Good idea but my HR is useless. Sent them an email about Box 14 codes two weeks ago and still no response. What if my employer doesn't have any documentation? Is there a standard list of these codes somewhere?

Unfortunately there's no universal standard for Box 14 codes - every employer can use their own abbreviations and systems. That's what makes it so confusing! If your HR is unresponsive, try asking coworkers who have been there longer if they know what the codes mean. Sometimes the accounting or payroll department can be more helpful than HR for tax questions like this. As a last resort, you can also try looking at your pay stubs throughout the year which might show some of these items broken down in more detail.

I think most Box 14 items don't even get reported on your federal return anyway - they're just informational. I've been doing my taxes for 20+ years and never had a problem with Box 14 stuff. The important stuff is in the other boxes that have specific places on your tax forms.

This is a good point I hadn't considered! My last US address was in Florida before moving to Germany. I still have my Florida driver's license though it's expired now. Would I still need to worry about state tax issues even though Florida doesn't have state income tax?

You're in a good position having your last residence in Florida since they don't have state income tax. States without income tax (like Florida, Texas, Nevada, etc.) don't generally pursue former residents for tax purposes. The bigger concern is for people from high-tax states like California or New York, where state tax authorities sometimes argue that you never truly "left" if you maintain certain connections. In your case with Florida, as long as you're filing your federal returns properly, you shouldn't have to worry about state tax complications.

This is so true! I got absolutely destroyed on taxes because I had UK investment funds that were classified as PFICs. The forms are ridiculously complicated (Form 8621) and the taxation is punitive compared to US-based investments. I ended up selling all my foreign funds and only investing through US brokerages now.

Thanks for the tip about FreeTaxUSA! Did it handle the scholarship question well? That's my biggest concern - making sure we properly categorize what's taxable vs. non-taxable.

FreeTaxUSA handled the scholarship situation really well. It specifically asks whether scholarship money was used for qualified expenses (tuition, books, required fees) versus non-qualified expenses (room and board, living expenses). It also provided clear explanations about which portions of scholarships are taxable and which aren't, something TurboTax didn't explain as clearly in my experience. The program walks you through it step by step and even has a help section specifically addressing graduate student scholarships and fellowships.

What about tax credits that weren't available before? I heard the income thresholds change when filing jointly and you might qualify for different credits?