One thing nobody has mentioned yet - make sure you're tracking utilities separately if possible! I installed separate meters for electric and gas in my rental portion, which makes it super clear what's deductible. If you don't have separate meters, you need a reasonable method to allocate those costs. Also, be careful about claiming home office deductions if you're already allocating part of your home as rental property. You can't double-dip and claim the same square footage as both rental property and home office.

This is such a helpful thread! I'm dealing with a similar situation but with a twist - I converted my garage into a studio apartment that I rent out. It shares the main house's electrical panel and water heater, but has its own entrance and bathroom. One thing I learned from my tax preparer is to be really careful about improvements vs. repairs when allocating expenses. The water heater replacement you mentioned would typically be considered an improvement and needs to be depreciated over time rather than deducted all at once. But if it was just a repair (like fixing a broken component), then you could deduct your allocated percentage immediately. Also, don't forget to consider whether your local zoning allows rental use - the IRS sometimes looks at this during audits to verify legitimate business purpose. And keep detailed records of everything! I use a simple spreadsheet to track all expenses with photos and receipts. It's been a lifesaver for staying organized. The mini-split system you installed exclusively for the rental area is definitely 100% deductible (though as a capital improvement, it would be depreciated). That's the nice thing about expenses that clearly benefit only the rental portion!

Has anyone used TurboTax Self-Employed for their Etsy/eBay sales? I've used regular TurboTax before but never the self-employed version. Does it help with all this confusion or is it worth paying for an actual accountant?

I feel your pain! I went through the exact same confusion when I started my small pottery business on Etsy two years ago. The tax requirements really do feel like they throw you into the deep end without a life jacket. Here's what I wish someone had told me from the beginning: Start simple and build your system as you go. I got so overwhelmed trying to track every penny perfectly that I almost gave up entirely. The most important thing is to separate your business from personal expenses right away - even if it's just a simple spreadsheet or a separate checking account. Track your major expenses (materials, shipping, platform fees) and keep all your receipts. You don't need to be perfect from day one. For the hobby vs business question - if you're actively trying to make money and treating it like a business (marketing, improving your products, etc.), then report it as a business. The IRS looks at your intent and effort, not just profit. The $600 threshold honestly isn't as scary as it sounds. You've always been supposed to report this income anyway, now the platforms just have to tell the IRS about it too. But remember - you're only taxed on PROFIT, not total sales. Don't let the tax stress kill your entrepreneurial spirit! It gets easier once you establish a routine, and there are good resources out there to help. Your side hustle can definitely be worth it - just take it one step at a time.

Just to reinforce what everyone else has said - you're absolutely right to file as Single in your situation. I see a lot of people get confused about Head of Household because the name makes it sound like it's about who runs the household or pays the bills, but it's really only about supporting qualifying dependents. Since you're 27, financially independent, and don't have any dependents of your own, Single is your only option regardless of your living arrangement with your parents. The IRS doesn't care that you're helping with utilities and groceries - that's just being a good family member, not a tax status qualifier. Your instinct about not wanting to mess up your parents' taxes was smart too. Even if multiple people could somehow claim HOH at the same address (which isn't your situation anyway), it would definitely raise flags. But filing as Single while they handle their own return appropriately? No issues whatsoever. Keep it simple, file as Single, and don't overthink it. You're handling this exactly right by asking questions upfront rather than guessing!

I'm glad to see such a thorough discussion here! As someone who's dealt with similar living arrangement questions, I wanted to add that it's worth double-checking your state tax situation too. While your federal filing status should definitely be Single (as everyone has correctly explained), some states have different rules or additional considerations for residents living in multi-generational households. Also, since you mentioned paying your parents for utilities and groceries, make sure you're not accidentally creating any gift tax implications if you're contributing large amounts. For most typical arrangements this isn't an issue, but it's something to keep in mind if you're paying them several thousand dollars annually. The consensus here is absolutely right though - file as Single federally, keep good records of your contributions to the household, and don't worry about the shared address causing any IRS issues. You're being smart by asking these questions upfront rather than guessing!

My states been pending since last year lmaooo welcome to the club 💀

The "accepted" vs "processed" thing confused me too when I first started filing! "Accepted" just means the IRS received your return and it passed their initial computer checks (no obvious errors, SSN matches, etc.). "Processed" means they've actually reviewed it, applied any credits/deductions, and determined your final refund amount. The 21-day processing time starts from when it's accepted, not processed. So you're still well within the normal timeframe - don't stress! Your federal return is moving through the system normally.

This is a really helpful thread! I'm in Nevada (another community property state) and just discovered I've been missing Form 8958 for the past 4 years. Like Derek, my spouse and I keep completely separate finances, but it sounds like we still need to split our income 50/50 for tax purposes regardless. From what everyone's saying, it seems like the main issue isn't the missing form itself, but whether you've been properly allocating income according to community property laws. If you've been reporting only your individual income without the 50/50 split, that could be a bigger problem than just the missing paperwork. I'm leaning toward consulting with a tax professional who understands community property rules rather than trying to figure this out myself. The peace of mind would be worth the cost, especially since it sounds like the rules are more complex than just "keep your finances separate.

The missing Form 8958 itself likely won't trigger penalties, but the underlying income allocation issue could be significant. In community property states, the IRS expects married couples filing separately to follow state law regarding income splitting, regardless of how you actually manage your finances. Here's what I'd suggest: First, determine if you've been properly allocating community income. If you and your spouse have been reporting only your individual earnings without the required 50/50 split, that's a substantive tax issue beyond just missing paperwork. The good news is that if your combined tax liability as a couple is correct (even if individually allocated wrong), the IRS is usually more lenient. For peace of mind, consider requesting your tax transcripts from the IRS to see if they've flagged anything unusual with your returns. You can also run some quick calculations - if splitting your incomes 50/50 would have resulted in roughly the same total tax liability you actually paid, you're probably in good shape. Given that you're in California and this affects multiple years, I'd really recommend at least a consultation with a tax professional who understands community property rules. They can quickly assess whether amendments are necessary and help you get compliant going forward.