14 Is income averaging still available? I thought that was eliminated years ago except for very specific situations like fishing income and farmers?

22 You're right that general income averaging was eliminated years ago. There is a special provision for lump-sum distributions from qualified retirement plans called the "10-year tax option" but it only applies in very limited circumstances - typically for people born before 1936, so it wouldn't apply to most beneficiaries today. For inherited retirement accounts, the current rules generally require beneficiaries to withdraw the entire balance within 10 years (with exceptions for certain eligible designated beneficiaries). So while you can't technically average the income across multiple tax years, you might be able to strategically withdraw amounts each year to minimize the tax impact if you haven't taken the full distribution yet.

17 Would it help to increase withholding on the regular W-2 job to offset the tax hit from the distribution? I'm about to get an inherited IRA and trying to avoid owing a ton next year.

What counts as "maintaining the home" exactly? I pay all the rent and utilities, but my ex buys most of the groceries and clothes for our son. Can I still claim Head of Household?

Maintaining the home specifically refers to expenses like rent/mortgage, property taxes, utilities, repairs, and groceries. The IRS looks at the overall cost of running the household - not specifically child-related expenses like clothing or education. If you pay all the rent/mortgage and utilities, that's typically the largest portion of household expenses, so you're probably still providing more than half the cost of maintaining the home even if your ex buys groceries and clothes. Just add up all your household costs for the year and make sure your portion exceeds 50%. Keep those records handy in case the IRS ever has questions.

Yikes! How did the audit turn out? I'm worried bc my ex and I alternate years claiming our daughter but I'm not sure if she knows that means only one of us gets Head of Household.

How did you handle insurance and liability issues with renting out heavy equipment? I'd be terrified someone would hurt themselves and I'd get sued into oblivion.

I purchased a specific commercial equipment insurance policy that covers rental use. It was about $1,800 annually but well worth the protection. I also created a simple LLC to own the equipment and had renters sign a detailed liability waiver that my attorney drafted. Most equipment sharing platforms also offer some basic insurance coverage as part of their service, though I wouldn't rely solely on that for heavy machinery. The key is being properly insured and having clear documentation of the equipment's condition before and after each rental.

Your accountant is partially correct but missing some nuance. Land itself is never depreciable, and certain permanent improvements to land (like grading or clearing) must be capitalized to the land basis. However, the equipment used to make those improvements is separate from the improvements themselves. If the equipment is used in a business or income-producing activity, it can typically be depreciated regardless of what you're using it for. The key distinction is between the equipment (depreciable asset) and the permanent land improvements (capitalized to land basis).

This is really concerning. I'll definitely be talking to our payroll department. Do you know if there's a specific IRS publication or something I can reference when I talk to them? I feel like they might push back since they've been doing it this way for a while.

There's no single IRS publication since this is a state tax issue, not federal. But each state's department of revenue has employer withholding guidelines. For example, Minnesota's website clearly states employers must withhold MN tax from nonresidents who perform services within Minnesota. I'd suggest a different approach: ask your payroll department for their specific policy on multistate withholding and request documentation on how they determine which states to withhold for. If they can't provide this, mention that you're concerned about potential personal liability for unpaid state taxes. That usually gets their attention since they don't want employees filing complaints with state agencies.

This is terrible advice. The states absolutely do care and their systems are increasingly sophisticated at catching non-filers. I work in state tax compliance and see audits triggered all the time for multistate workers who failed to file. Just because you haven't been caught yet doesn't mean you won't be. The statute of limitations for non-filers can be unlimited in some states!

Thanks for mentioning this! Is the $250,000 threshold based on the balance at the end of the year, or is it at any point during the year? And do you have any recommendations for providers that offer good flexibility without charging an arm and a leg?

The $250,000 threshold is based on the total assets in the plan at the end of the year (December 31st). So you'll need to file Form 5500-EZ by July 31st of the following year if your balance is $250,000 or more on December 31st. As for providers, I'm using Fidelity for my Solo 401(k) and have been happy with them. Their plan documents allow for both traditional and Roth contributions on the employee side, and they don't charge any setup fees or annual maintenance fees. E*TRADE and Vanguard are also popular options, but Vanguard doesn't offer Roth options for their Solo 401(k) last I checked. Charles Schwab is another good option with no fees, but they don't accept rollovers from other plans if that's something you might need in the future.

I did this calculation last year. For me (33% marginal tax bracket), contributing $30k to my Solo 401k saved about $9,900 in taxes immediately. Even factoring in that I'll pay taxes on withdrawal later, the tax-free growth over 25+ years makes a HUGE difference in the final amount. Plus having that $9,900 working for me now instead of going to the IRS is a big advantage.

That makes sense, thanks for the numbers! I guess I need to consider my time horizon too. I'm probably 20 years from retirement so that tax-free growth would compound significantly. Do you have a recommendation for how much self-employment income makes it "worth it" to set up a Solo 401k? I'm only making about $25k from my side gig right now.