I've been through a similar situation with high W2 income and rental losses. Unfortunately, at your income level ($670K), you're well beyond the phase-out range for rental loss deductions. The passive activity loss rules are pretty strict here. However, since you work in property management, you might want to explore whether any of your rental activities could qualify for different treatment. For example, if you're providing substantial services beyond typical landlord duties (like regular maintenance, landscaping, or other hands-on management), you might be able to argue that some portion isn't purely passive rental activity. Also consider: 1. Make sure you're maximizing current-year deductions by properly categorizing repairs vs. improvements 2. Look into cost segregation for future years to accelerate depreciation 3. Keep detailed records of all your time and activities related to the property The losses aren't "lost" - they'll carry forward and can offset future rental income or be fully deducted when you sell. Given your income level, you'll likely benefit more from these losses in the future anyway. You might want to consult with a CPA who specializes in real estate taxation to explore any nuances specific to your property management background.

I'm in a very similar situation and have been researching this extensively. At your income level, you're unfortunately past the point where any rental loss deductions are allowed against ordinary income. The $100K-$150K phase-out range means you get zero deduction at $670K. However, don't overlook some potential current-year tax savings while those losses carry forward: 1. **Expense categorization review** - Make sure repairs aren't being capitalized as improvements. Things like fixing existing systems, painting, minor plumbing repairs can be fully deductible repairs rather than depreciable improvements. 2. **Section 199A deduction** - If you have any rental income (even from other properties), the QBI deduction might apply to offset some of your high W2 income. 3. **Professional development expenses** - Since you work in property management, any courses, certifications, or professional development related to real estate might be deductible as employee business expenses if you itemize (though this is limited post-TCJA). The silver lining is that with your income level, those suspended losses will likely be worth more to you in future years when you can use them. At your current tax bracket, a $30K loss could save you around $11K+ in taxes when you eventually sell or have rental profits to offset. Keep meticulous records of everything - the IRS loves to challenge rental loss carryforwards if documentation is poor.

This is such a helpful and comprehensive discussion! As someone who's been lurking on this community for a while dealing with my own foreign investment complications, I really appreciate everyone sharing their real experiences with PFIC reporting. One aspect I wanted to add based on my research is the importance of understanding the "beginning of the year" vs "end of the year" valuation issues with ULIPs. Since these policies often have different valuation dates than the US tax year (December 31), you might need to get specific valuations as of December 31st for each year to properly calculate the annual income inclusions. Also, I've noticed that some ULIPs have surrender charges or early withdrawal penalties that could affect the tax calculations. If your brother's ULIP has been held for the full 10-year term, he might be past the surrender charge period, which could make the timing more favorable from a pure investment standpoint (separate from the tax implications). The documentation point that several people have emphasized really can't be overstated. I started gathering paperwork for my own foreign investments months ago, and I'm still waiting for some historical statements from overseas. Starting that process early, even before you have a full compliance strategy, is definitely the right approach. Thanks again to everyone who has shared their experiences - this kind of practical guidance is invaluable for those of us navigating these complex international tax issues!

I've been following this discussion with great interest as I'm dealing with a similar ULIP situation for my spouse. One thing I wanted to add that might be relevant - if your brother's ULIP is from India (which many ULIPs are), there's an additional complexity regarding the India-US tax treaty and potential relief provisions. Under Article 25 of the India-US tax treaty, there are specific provisions for retirement and pension arrangements that sometimes apply to certain types of ULIPs, particularly those held for long periods like your brother's 10-year policy. While this doesn't eliminate PFIC reporting requirements, it can sometimes affect the timing and method of taxation. Also, I noticed that several people mentioned the QEF election challenges with foreign insurance companies. In my experience with Indian ULIPs specifically, some of the larger insurance companies (like LIC, HDFC Life, or ICICI Prudential) have started to become more familiar with US reporting requirements due to the large NRI customer base. It might be worth reaching out to the policyholder services department specifically asking about "US tax compliance documentation" or "PFIC reporting requirements" rather than just requesting general financial statements. The key is to be very specific about what you need - annual ordinary earnings and net capital gains broken down by the investment portion of the policy. Some companies have developed standardized reports for this purpose, though you might need to escalate to specialized departments. Given the 10-year holding period and the complexity everyone has described, I definitely agree that professional help is the way to go, but having this treaty angle explored could potentially provide additional compliance options that aren't available for ULIPs from other countries.

Wait, I'm confused about land vs building depreciation. My understanding is you can only depreciate the building portion of your property, not the land. How do you calculate this split if you've made improvements?

One additional consideration that hasn't been mentioned yet - don't forget about Section 179 deduction and bonus depreciation for some of your rental property improvements! While most structural improvements to rental property need to be depreciated over 27.5 years as discussed, certain types of property improvements might qualify for accelerated depreciation. Things like security systems, some appliances, and certain non-structural improvements might qualify for immediate expensing under Section 179 or bonus depreciation. For example, if you're installing new appliances as part of your bathroom renovation, those might be eligible for immediate deduction rather than the 27.5-year schedule. The rules can be complex, but it's worth exploring since it could provide significant tax benefits in the year you make the improvements. Also, if you're doing substantial renovations that involve any accessibility improvements, there may be additional tax credits available beyond just the depreciation benefits. Always worth checking with a tax professional to make sure you're maximizing all available deductions and credits for your rental property investments!

I'm so relieved to find this thread! I just formed my single-member LLC for my web development business three months ago and have been getting those automated IRS notices about Form 941 filings. I was convinced I was already behind on some tax requirement even though I haven't made any income or hired anyone yet. Reading through everyone's experiences has been incredibly reassuring - I had no idea the IRS just sends those notices to anyone with an EIN regardless of their actual filing requirements. I've been stressing for weeks thinking I somehow filled out my EIN application incorrectly. I've been keeping receipts for my development tools subscriptions, business license fees, and home office equipment, but wasn't sure if tracking these expenses was worthwhile since I haven't landed any clients yet. Learning about the potential startup expense deductions makes me glad I've been staying organized from the beginning. Planning to call that IRS Business & Specialty Tax Line mentioned by several people here to get my account updated and stop those notices. It's amazing how many new LLC owners go through this exact same confusion - thank you all for sharing your stories and making me feel less alone in navigating these tax complexities!

I'm in the exact same situation and this thread has been a lifesaver! I set up my single-member LLC for my freelance marketing business back in October but haven't had any clients yet. Those automated IRS notices about quarterly filings have been giving me major anxiety - I was convinced I was already screwing up my taxes before making a single dollar. It's such a relief to learn that Form 941 is only required when you're actually paying wages to employees. I've been keeping receipts for my laptop, marketing software subscriptions, and business insurance, but wasn't sure if it was worth the effort since I haven't generated any income yet. Hearing about the potential $5,000 startup expense deduction definitely motivates me to stay organized with those records. I'm definitely going to call that IRS Business & Specialty Tax Line to get my account updated and stop those scary automated notices. Thank you everyone for sharing your experiences - it's incredible how many new LLC owners go through this identical panic. This community has been invaluable for understanding these confusing tax requirements!

I'm in a very similar situation with my 19-year-old son and this thread has been incredibly eye-opening! I was initially planning to claim him as a dependent since he lives at home and I thought I was covering most of his expenses, but now I'm realizing I need to really dig into the numbers. Like many of you mentioned, I think I was significantly underestimating how much his student loans and part-time job actually contribute to his support. He received about $14,000 in student loans this year and earned roughly $7,500 from his campus job. When I add in all the personal expenses he covers - gas, clothes, textbooks, food when he's at school, entertainment - it might actually push him over that 50% threshold. The fair market rental value calculation will be really important for us too. I was just thinking about what his room "costs" me, but you're absolutely right that it should be based on what he would actually pay for similar housing in our area. I'm going to create that detailed support worksheet this weekend using the IRS Publication 501 format that several people recommended. It sounds like the key is being thorough, honest, and keeping good documentation rather than just picking whatever saves the most money. Thanks to everyone who shared their experiences - it's really helpful to see how other families have worked through this legitimately while following the proper tax rules!

I've been following this discussion with great interest as I'm in a nearly identical situation with my 20-year-old daughter. What strikes me most about all these responses is how many families initially assume they're providing most of their child's support, only to discover through careful calculation that the student is actually more independent than they realized. The recurring theme seems to be that student loans are often the game-changer in these calculations. Many parents (myself included) tend to think of loans as "future money" rather than current support, but the IRS correctly treats loan disbursements as support the student provided for themselves in the year received. After reading through everyone's experiences, I'm convinced that the key is creating an honest, comprehensive support worksheet using actual numbers rather than rough estimates. The fair market rental research mentioned by several people seems particularly important since housing is typically the largest expense category. What I appreciate most about this discussion is that everyone is focused on legitimately following the tax rules rather than just finding loopholes. It's reassuring to see that when families do the math properly and document their calculations, they can often find a legitimate path that also happens to be beneficial. I'm planning to tackle this systematic approach this weekend. Between student loans, part-time work, and personal expenses, I suspect my daughter might actually qualify as independent when we calculate everything correctly. Thanks to everyone who shared their experiences - this has been incredibly valuable guidance!