This is such a comprehensive discussion! I wanted to add one important point that hasn't been mentioned yet - if you're supporting a parent who lives separately, make sure to keep records of ANY rent or mortgage payments you make for their housing, even if it's not in your name. I support my grandmother who lives in her own apartment, and I pay her rent directly to the landlord each month ($1,400). Initially I was worried this wouldn't count the same as facility payments, but the IRS considers housing costs as support regardless of whether it's a private residence, assisted living, or nursing home. Also, for anyone wondering about the timing - you need to provide more than half the support for the ENTIRE tax year to claim Head of Household. So if you only started supporting your parent partway through the year, make sure your calculations cover just the period you were actually providing support, not the full year. The documentation advice everyone's given is spot-on. I use a simple Excel sheet with columns for Date, Amount, Category (rent, medical, food, etc.), and Payment Method. Takes maybe 5 minutes a month to update but gives me complete confidence when filing. One last tip - if your parent receives any government benefits like food stamps or Medicaid, those don't count as income that affects your ability to claim them as a dependent. Only consider their actual cash income like Social Security, pensions, or wages.

This has been an incredibly informative discussion! I'm dealing with almost the exact same situation as the original poster - supporting my elderly mother who lives in a memory care facility about 45 minutes away from me. I pay $4,200 monthly for her care plus all medical expenses not covered by Medicare, and she only receives $1,650 in Social Security benefits. I've been filing as Single for the past three years because I genuinely thought the "must live with you" rule applied to everyone, including parents. Reading through all these responses has been eye-opening - I had no idea there was a specific exception for parents! What really helped me was seeing the breakdown of what counts toward support. I was only thinking about the facility fees, but now I realize I should include the clothing I buy her, the phone service I pay for, transportation to medical appointments, and even the activities and outings I cover when she has good days. When I add all that up, I'm easily providing over 80% of her total support. I'm definitely going to start keeping better records using the spreadsheet method several people mentioned. And I think I need to look into filing amended returns for the previous years - with the amounts I'm paying, the difference between Single and Head of Household filing status could be substantial. Thanks to everyone who shared their experiences and advice. This community has potentially saved me thousands of dollars in taxes I should have been claiming all along!

Has anyone tried Drake Tax Software for S-Corps? My CPA uses it and suggested I might want to try the prosumer version for my small S-Corp.

I've been filing S-Corp returns for my consulting business for about 3 years now and have tried most of the major software options. Here's what I wish someone had told me when I started: For your first year, I'd actually recommend starting with TurboTax Business despite the higher cost. Yes, it's more expensive, but the interview process is really thorough and educational. It explains WHY certain deductions apply to S-Corps and helps you understand the underlying concepts, not just fill out forms. Once you're comfortable with S-Corp tax concepts (probably by year 2 or 3), then switch to TaxAct to save money. I made that transition and it worked well because by then I understood what I was looking for. One critical tip regardless of software: make sure you're paying yourself a "reasonable salary" through payroll before taking distributions. This is the #1 mistake I see new S-Corp owners make, and it can trigger an audit. The software won't necessarily warn you about this ratio, so it's worth discussing with your tax advisor even if you're filing yourself. Also, keep detailed records of all business expenses throughout the year - don't wait until tax time to organize everything. Both TurboTax and TaxAct are only as good as the information you put into them.

I went through this exact situation when I sold my home in Texas last year, and I want to reassure you that the process is much more straightforward than it initially seems! Yes, the title company will absolutely issue you a 1099-S showing the full gross proceeds from your sale - in your case, likely that $450-500k amount. But here's the key thing everyone needs to understand: this form is NOT a tax bill or even a calculation of what you owe. It's simply a report to the IRS of the transaction that occurred. The title company has zero knowledge of your purchase price, improvements, or any other factors that determine your actual tax liability. They're just reporting "Hey IRS, this person received X dollars from a real estate sale." That's it. When you file your taxes, YOU calculate your actual gain by taking the sale proceeds, subtracting your selling expenses (realtor commissions, closing costs, etc.), then subtracting your adjusted basis (original purchase price + qualifying improvements + certain purchase closing costs). Based on your numbers - $285k purchase + $40k improvements = $325k basis - you're looking at a gain of maybe $125-175k depending on final sale price and expenses. The beautiful part? Since you've lived there as your primary residence for over 2 years, you can exclude up to $250,000 of that gain under Section 121. You'll likely owe ZERO federal tax on this sale despite what that 1099-S shows! My advice: start organizing your documentation now (purchase docs, improvement receipts, etc.) so you're ready for tax season. The anxiety you're feeling is totally normal, but you're actually in great shape!

I just want to add something that might be helpful for your specific situation - since you mentioned you're selling in the next few months, this is actually perfect timing to get everything organized properly! One thing I learned from my own home sale experience is that it's worth double-checking which of your improvements actually qualify as "capital improvements" versus regular maintenance. Your kitchen renovation and bathroom update definitely count, but make sure you're not accidentally including routine repairs or maintenance items in that $40k figure. Also, don't forget that you can include certain costs from your original purchase in your basis calculation - things like title insurance, attorney fees, recording fees, and survey costs from 2018. These might seem small individually, but they can add up to a few thousand dollars that will further reduce your taxable gain. Given your numbers ($285k purchase + $40k improvements + original closing costs), you're almost certainly going to fall well under the $250k Section 121 exclusion even after accounting for your gain. The 1099-S will look scary when you get it, but remember - it's just a reporting form, not a tax calculation! Start gathering those documents now while you have time, and you'll be in great shape when tax season rolls around. Sounds like you made some smart investments in your home over the years!

Has anyone used TurboTax for calculating these education credits? I'm trying to figure out if it automatically optimizes how scholarships are allocated or if I need to manually figure it out first and then enter it that way.

For anyone still confused about the allocation flexibility, here's a practical example that might help clarify things. Let's say you have $10,000 in scholarships and $15,000 in total college expenses broken down as: $8,000 tuition, $3,000 room/board, $2,000 books, and $2,000 personal expenses. Since only tuition and books ($10,000 total) are qualified expenses for AOTC, you could allocate your $10,000 scholarship to cover the $3,000 room/board + $2,000 personal expenses + $5,000 of tuition. This leaves you with $3,000 of tuition + $2,000 books = $5,000 in qualified expenses that you paid out-of-pocket, which you can then use for your AOTC calculation. The key insight is that you get to choose how to allocate unrestricted financial aid, and it's usually best to apply it to non-qualified expenses first to maximize your tax credits. Just remember that any scholarship money used for non-qualified expenses (like room/board) becomes taxable income to you - but for most students, the tax benefit from a larger education credit outweighs this.

One thing nobody's mentioned yet - make sure you're tracking your quarterly estimated tax payments for 2025! I got hit with an underpayment penalty my first year with affiliate income because I didn't realize I needed to make quarterly payments. Since you're not having taxes withheld from this income like you would with a regular job, the IRS expects you to pay as you earn throughout the year. If you wait until April 2026 to pay taxes on all your 2025 earnings, you could face penalties.

Just a tip that helped me with my small Etsy business income - keep a separate spreadsheet tracking ALL your income and expenses throughout the year. Update it monthly at minimum. PayPal's reporting is okay but not great for tax purposes. I export my PayPal activity every month to CSV, clean it up in Excel, and add it to my tracking spreadsheet. This makes tax time so much easier because I'm not scrambling to figure out what all these random deposits were from 10 months ago.