One thing nobody's mentioned yet - is there any chance you paid for your Spring 2023 semester during 2022, even though you didn't attend? Sometimes schools bill for the next semester in December of the previous year. If you DID pay any qualified education expenses for undergraduate studies in 2022 (even if you didn't attend those classes), you might have a case for AOTC. The timing of PAYMENT is what matters for tax purposes, not when you attended classes. Worth checking your bank/credit card statements from late 2022 to see if you made any payments to your undergrad institution!

This is a really complex situation that highlights how tricky education credits can be! Based on what you've described, your uncle's tax advisor is likely correct. The key issue is that once you've completed your undergraduate degree (which you did in December 2022), the IRS generally considers your "first four years of higher education" to be complete, regardless of whether you actually took four full academic years to finish. The fact that your only 1098-T for 2022 has the graduate student box checked is a major red flag for AOTC eligibility. The IRS specifically excludes graduate-level coursework from AOTC, and medical school is definitely considered graduate education. However, don't despair! You should absolutely look into the Lifetime Learning Credit instead. While it's not as generous as AOTC (max $2,000 vs $2,500, and it's non-refundable), it's designed exactly for graduate students and continuing education. You can claim LLC for qualified tuition and fees paid for your medical school courses. The LLC is calculated as 20% of up to $10,000 in qualified education expenses, so if you paid $10,000+ in medical school tuition/fees in 2022, you could get the full $2,000 credit. Make sure to keep all your receipts and documentation for medical school expenses - books, lab fees, and required course materials may also qualify.

Quick tip - don't forget about state taxes too! Depending on Texas local tax laws, you might need to report this on your state return as well. Some states follow federal treatment of settlements while others have their own rules.

This is such a thorough discussion! I went through a similar situation with an employment discrimination settlement last year. One thing I'd add is to make sure you get a copy of the settlement agreement that clearly states the nature of the damages being awarded. In my case, the settlement agreement specifically mentioned "emotional distress and mental anguish" which made it much easier when I had to explain the tax treatment to my tax preparer. If your agreement isn't clear about this, you might want to get a clarifying letter from your attorney. Also, regarding the 1099-MISC timing - in my experience, some companies are slow to issue these for settlements. I had to follow up with my attorney in February because the company "forgot" to send mine. Don't assume they'll automatically handle it! The advice about including a written statement with your return is spot-on. I actually attached a brief explanation referencing the specific IRS code sections for emotional distress settlements (Section 104(a)(2)) and the attorney fee deduction (Section 62(a)(20)). Made me feel more confident that everything was properly documented.

Anyone know which form I need to use for reporting US-source FDAP income? Is it just part of the regular 1040-NR or is there some special schedule?

This is a great discussion that covers the key points really well! Just wanted to add one more consideration for non-resident aliens dealing with FDAP income - don't forget about the substantial presence test if you've been in the US for an extended period. Even if you're on a work visa and consider yourself a non-resident alien, if you meet the substantial presence test (generally 183+ days over a 3-year period with specific weighting), you might actually be considered a resident alien for tax purposes. This would completely change your reporting requirements - you'd then need to report worldwide income, not just US-source FDAP. The good news is there are exceptions and tie-breaker rules, especially if you have a closer connection to your home country. But it's definitely worth checking if you've been in the US for substantial periods across multiple years.

Random question but does anyone know if there's a time limit for employers to submit a corrected W2C? My situation is similar but from 2022 and I'm worried it might be too late to get them to fix it.

This is such a frustrating situation, but you're definitely on the right track! I went through something very similar when my company merged with another one mid-year and both entities ended up filing W2s for the same period. One thing that really helped me was creating a detailed timeline document that showed: - Exact dates of employment at the company - When the payroll system switch happened - Pay periods covered by each W2 - Bank deposit dates and amounts for each pay period This made it crystal clear to both my employer and the IRS exactly where the overlap occurred. I also kept screenshots of my online pay stubs from both systems showing the duplicate reporting. The key is having ironclad documentation. Since you have that email from HR telling everyone to only use the new W2, that's golden evidence. Make sure to include that with everything else when you respond to the CP2000. Don't let your employer's confusion derail you - sometimes it's easier to just go directly to the IRS with your evidence rather than trying to get a company to admit they made an error. The IRS deals with payroll system transition issues all the time and they'll know what to look for in your documentation.

I feel your pain on this one! I went through almost the exact same situation last year when I had to sell due to a family emergency. Lost about $35k on the sale and was shocked to learn I couldn't deduct any of it. What really helped me understand the rationale (though it didn't make me any less frustrated) was learning that the IRS views your primary residence as providing you with "imputed rent" - basically, you got value from living there rent-free that you would have otherwise paid to a landlord. So in their view, you received ongoing benefit from the asset even if you lost money when selling. It's still maddening that they'll happily tax gains above the exclusion but won't let you deduct losses. The asymmetry is real and it definitely feels like the house always wins. At least you got some good advice in this thread about maximizing other deductions and understanding the business use exceptions - those nuggets of information might help soften the blow a little bit. Hang in there - you're definitely not alone in thinking this particular tax rule is fundamentally unfair to homeowners!

I really appreciate everyone sharing their experiences with this frustrating situation. As someone who works in tax preparation, I see this exact scenario come up multiple times every year, and the disappointment on clients' faces when I have to explain the "heads I win, tails you lose" nature of primary residence taxation is always heartbreaking. One thing I'd add to this excellent discussion: if you're facing a potential loss situation in the future and have some flexibility on timing, consider whether you might benefit from a partial rental conversion before selling. Even renting out just a room or basement apartment for a legitimate period can change the tax treatment for that portion of the property. Also, for anyone reading this thread who hasn't sold yet - document EVERYTHING. Keep receipts for every improvement, no matter how small. Even if you can't deduct losses on personal residence sales, those improvements increase your basis and could save you thousands in taxes if the market recovers and you end up with a gain instead. The tax code isn't fair in this regard, but understanding the rules can at least help you make the most of a bad situation. Thanks to everyone who shared practical resources and experiences here - this is exactly the kind of real-world advice that helps people navigate these challenges.