14 Quick tip if you're using TurboTax - if you say "Yes" to question A and "No" to question B, it will flag this as an issue but still let you file. The software will likely generate a warning about potential penalties, but go ahead and continue. In my experience filing several rental returns, I've never had an issue with the IRS following up on this specific discrepancy for small landlords. Just make sure all your income and expenses are accurately reported.

As someone who went through this exact situation last year, I can confirm what others have said - answer honestly on Schedule E. For question A, answer "Yes" since you were required to issue 1099s (both payments exceeded $600). For question B, answer "No" since you haven't issued them. The good news is this won't prevent your return from being accepted. The IRS understands that first-year landlords often miss this requirement. You can still issue the 1099s now - yes, they'll be late, but there's usually penalty relief available for first-time filers who weren't aware of the requirement. Going forward, get W-9 forms from anyone you plan to pay over $600 in a year. This makes the 1099 process much smoother next year. The deadline is January 31st for providing forms to recipients and filing with the IRS. Don't let this stress you out too much - focus on accurately reporting all your rental income and expenses on Schedule E, which is what the IRS really cares about.

Has anyone used TurboTax to handle this situation? My closing was in October 2024 and I got a credit for the seller's portion of 2024 taxes that will be paid in 2025, but I'm not sure how to enter this in the software.

This is a really common source of confusion for first-time homebuyers! You're absolutely right to ask about the timing. The key principle is that property taxes are deductible in the year you actually pay them, not the year they cover. Since you didn't make any actual property tax payments in 2024, you won't have a property tax deduction for your 2024 return. The credit you received at closing is considered part of the purchase transaction - it reduces your cost basis in the home rather than creating a deductible expense. When your escrow account pays the property taxes in February 2025 (for the 2024 tax year), that's when you'll be able to claim the deduction - on your 2025 tax return that you'll file in early 2026. Make sure to keep good records of when the payment is actually made, as that's what determines which tax year you can claim the deduction. One thing to double-check: contact your mortgage servicer to confirm exactly when they plan to make the property tax payment from your escrow account. Some lenders make these payments in December even when they're not due until February, which could affect your deduction timing.

One thing I haven't seen mentioned yet is the importance of documenting the timing of when your sister lost her job and when your niece moved in with you. The IRS might want to see that there was a legitimate reason for the change in living arrangements, not just a tax strategy. Since your sister lost her job and couldn't afford her apartment, that creates a clear timeline showing this was a necessary family support situation. Keep any documentation you have about your sister's job loss (unemployment filing, final paycheck, lease termination, etc.) as this helps establish the legitimacy of your claim. Also, just a heads up - even though your niece has been with you since August, the IRS calculates the "more than half the year" test based on the number of days. Since August 1st to December 31st is only 153 days out of 365, you'll need her to stay with you through at least mid-July 2025 to meet the residency test for claiming her on your 2025 taxes. But it sounds like that won't be an issue given your family's situation. You're doing such a kind thing taking care of your niece during this difficult time. The tax benefits are definitely something you deserve for stepping up when your family needed it most!

This is such a comprehensive discussion! I wanted to add one more consideration that might be relevant - the Earned Income Tax Credit (EITC). If you qualify to claim your niece as a dependent and meet the income requirements, you might also be eligible for EITC which could significantly increase your refund. For 2025, if you're single and have one qualifying child (which your niece would be if she meets all the dependent tests), you can earn up to around $46,560 and still qualify for some EITC. The credit phases out as income increases, but even at higher income levels you might get some benefit. The EITC requirements are a bit different from the regular dependent tests - your niece would need to have a valid Social Security number and meet the age/student requirements (which at 14 and in school, she does). Just another potential tax benefit to look into when you're preparing your return! Also want to echo what others have said about keeping detailed records. The IRS can be pretty thorough when reviewing dependent claims for relatives, so having that paper trail of support, residency, and the circumstances that led to the arrangement will be really valuable if you ever get questioned about your claim.

One thing nobody mentioned - make sure your HSA provider issues you a 1099-SA for any excess contribution you withdraw! Some providers don't automatically do this for excess contribution removals, and you definitely need it to properly complete your tax forms.

Just wanted to add my experience as someone who went through this exact situation last year. I also over-contributed to my HSA due to partial year coverage and was really stressed about the penalties. The key thing I learned is that you absolutely must act before your tax filing deadline (or extension deadline if you file an extension) to avoid that 6% excise tax. Don't wait around hoping it will resolve itself - the IRS is pretty strict about HSA contribution limits. I ended up working with my HSA provider to remove the excess contribution plus any earnings it generated. The process was actually simpler than I expected once I got through to the right department. They calculated the earnings for me and issued the appropriate tax forms. One tip: when you contact your HSA provider, be very specific that you're requesting an "excess contribution removal" - not a regular distribution. This ensures it gets processed correctly and you get the right tax treatment. Good luck getting it sorted out!

kinda unrelated but ive noticed these youtubers always buy way more food than needed for the actual video. like theyll buy 5 different kinds of expensive cheese just to use a tiny bit of each one. seems wasteful but i guess if they can write it all off who cares lol

This is such a fascinating area of tax law! As someone who's worked with small business tax issues, I can confirm that the "primary purpose" test is absolutely crucial here. One thing I'd add is that food YouTubers should also consider the "exclusive use" vs "mixed use" principle. If ingredients are used EXCLUSIVELY for content creation (like specialty items they'd never normally buy), those are slam-dunk deductions. But for mixed-use items (like basic staples they'd buy anyway), they need to be more careful about only deducting the business portion. I've seen creators get into trouble by treating their entire grocery budget as a business expense just because they occasionally film cooking videos. The IRS is pretty good at spotting patterns that don't make sense - like a family of four suddenly claiming $2000/month in "business" food expenses when their channel only has 500 subscribers. The documentation advice everyone's giving is spot-on. Keep those receipts, match them to specific videos, and be honest about what's truly for the business versus personal consumption. Better to be conservative and sleep well at night than get aggressive and risk an audit.