How to add Safe Harbor for Small Taxpayers section in FreeTaxUSA software?

Thanks for responding! I've gone through the Schedule E section multiple times and checked the "Additional Information" areas, but I still don't see anything specific to Safe Harbor for Small Taxpayers. I even searched using their search function. Is there a specific wording I should be looking for? My property definitely qualifies - it's valued way under the limit and my rental income is only about $9,200 this year.

You might need to manually add it as a statement. In FreeTaxUSA, go to the "Miscellaneous" section from the main menu, then look for "Statements" or "Additional Information." You can create a custom statement there titled "Safe Harbor for Small Taxpayers Election" where you state you're electing to use the safe harbor under Revenue Procedure 2019-38. Include in your statement the property address, that you're making the election for tax year 2024, and confirm that you meet both the gross receipts test and the unadjusted basis test. You should also note that you're not deducting depreciation separately since it's included in the safe harbor calculation.

Does taxr.ai actually work with FreeTaxUSA specifically? I'm using it this year too and keep running into weird questions about my rental. Does it just tell you where to click or does it actually explain the tax concepts too?

I'm skeptical about these tax help services. How much does taxr.ai cost? I've been burned before by "free" tax help that ended up charging me at the end.

It works with any tax software actually - I uploaded my rental docs and it explained exactly what qualified for Safe Harbor and how to report it. They have tax pros that review your situation and give personalized advice, not just generic info like you'd find on Google. The best part is they explain everything in normal human language. My rental situation was complicated (partial year, some repairs, etc.) and they gave me step-by-step instructions for FreeTaxUSA specifically.

Wait, how does this Claimyr thing actually work? I've been trying to call the IRS about my rental property questions for weeks with no luck. Do they actually get you through the phone tree somehow?

Yeah right, nobody gets through to the IRS this time of year. I've literally spent 4+ hours on hold multiple times. This sounds like snake oil - there's no way they can magically get you through when millions of people are calling.

It's a service that keeps dialing the IRS for you and navigates the phone tree automatically. When they reach a human agent, they call you and connect you. It's not magic - they're just using technology to handle the frustrating waiting part. Yes, they navigate the whole phone tree for you. You just tell them what department you need (in this case I selected tax questions for individual filers) and they handle all the waiting and button-pressing. When they get a human, your phone rings and you're connected.

That's super helpful info! Am I correct in understanding that I still need to fill out the normal expense categories in FreeTaxUSA, but then somehow indicate I'm using Safe Harbor for the repair/maintenance expenses? Or do I just put the Safe Harbor amount ($1,000 in my case since 2% of my property's basis would be higher) directly into one of the expense categories?

You'll want to fill out most of the normal expense categories in FreeTaxUSA (mortgage interest, property taxes, insurance, etc.), but for repairs and maintenance, you'd put your Safe Harbor amount. Put the $1,000 Safe Harbor amount in the "Repairs and Maintenance" line on Schedule E. Then in your attached statement (that you create under Miscellaneous Forms), explain that this represents your Safe Harbor for Small Taxpayers election amount under Rev. Proc. 2019-38 rather than actual repair expenses. It's really important to include that statement so the IRS understands why you're claiming exactly $1,000 for repairs. Also note in your statement that you're not claiming depreciation separately since it's included in the Safe Harbor amount.

There's also a Safe Harbor for Rental Real Estate that's different from the Small Taxpayer Safe Harbor. I mixed these up last year and it was a mess. FreeTaxUSA doesn't clearly distinguish between them in the interface.

Wait, really? I didn't know it was a permanent election! That changes things a lot for me. I was planning to do some major renovations next year that I'd want to depreciate normally. Is there any flexibility at all with this?

I should clarify - it's not permanently permanent. You're electing it annually, but you must apply it consistently to the same building+land. So you can stop using it if you no longer qualify (like if your gross receipts exceed $10,000 or your building's unadjusted basis exceeds the threshold). If you're planning major renovations next year, those would actually increase your unadjusted basis, which might make the Safe Harbor less valuable since your deduction is limited to 2% of that basis. But you could potentially still qualify and elect it again next year - it would just be calculated on the new higher basis.