For the support test, would the mortgage payment and utilities I pay count toward my support of him? And would his contribution just be whatever he spends on himself from his SS money? Still trying to understand how to calculate this properly.

The support calculation includes housing costs, so your mortgage payment and utilities would definitely count, but only for his portion. The IRS generally accepts dividing these costs evenly by the number of people in the household. So if it's just you and your dad, half of your housing costs would count as support you provide for him. For his contribution, you're right - it's whatever he spends from his SS on his own support (food, clothing, medical expenses, personal items, etc.). If he puts money in savings or spends it on non-support items, that doesn't count as him supporting himself.

That's a good point. The most common audit trigger for HoH is when the dependent doesn't properly indicate their status. Communication is key here!

Does the IRS ever pre-approve these kinds of deductions? I'm worried about claiming it then getting hit with penalties later.

The IRS doesn't offer pre-approvals for specific deductions before you file. They review after the fact if questions arise. The best protection is thorough documentation. This means doctor's letters clearly stating medical necessity, history of treatments for issues caused by the excess skin, and a clear connection between the gastric bypass and the need for skin removal. The better your documentation, the stronger your position if questioned later.

That's really helpful! Did you have any issues with the IRS questioning the deduction? And did you need to get specific CPT codes included in your documentation?

Would it be worth filing anyway just to establish the capital loss? I hear you can carry those forward to future tax years when you might have actual income.

That's actually a good question about carrying forward the loss. Technically, yes, you could file just to document the $6 capital loss and carry it forward to future tax years. The IRS allows you to carry forward capital losses indefinitely until they're used up. However, for such a small amount ($6), it's probably not worth the effort of filing just for that. The time spent preparing and filing a return would far outweigh any potential future tax benefit from such a small loss. If the loss were larger (say, hundreds or thousands of dollars), then it would make more sense to file and establish that carryforward.

The threshold for PayPal to issue a 1099-K for crypto in 2025 is $600 in total proceeds, so they probably won't send one for a single $500 transaction. But even if they did, the IRS matching system would see it was sold at a LOSS, not a gain. They generally don't pursue non-filers when there's no tax due (especially for dependent students). Just keep your records showing it was a loss transaction.

I used Google Sheets for my first year in business and it was fine, but I only had about 10-15 transactions per month. I created columns for date, vendor, amount, category, and notes. Then had another sheet that totaled each category for tax purposes. Worked okay, but got tedious to maintain as I grew.

If the business doesn't have enough income, can you carry forward the unused Section 179 amounts to future years? Or do you lose that deduction completely?

Great question! You don't lose the deduction - any disallowed Section 179 deduction can be carried forward indefinitely until you can use it. So if your business doesn't have enough income this year, you can deduct it in future years when your income is higher. As for state treatment, it varies widely. In my state (California), they have a much lower Section 179 limit than federal and require the rest to be depreciated normally. Always check your specific state rules or talk to a local tax professional.

This is great advice! How do you decide which assets to use Section 179 on vs regular depreciation? Is there a rule of thumb?

I don't have a strict rule of thumb, but here's how I approach it now: For smaller purchases (under $10,000), I'll usually take Section 179 for the immediate benefit. For larger purchases, I look at my income projections for the next few years. If I expect my income to increase significantly or if I'm currently in a lower tax bracket than I expect to be in future years, I'll use regular depreciation. This spreads the tax benefit out to years when each dollar of deduction will save me more in taxes. It's also worth considering your cash flow needs. If you need tax savings now to reinvest in your business, Section 179 might make sense even if it's not mathematically optimal long-term. Tax planning is as much about your business strategy as it is about the technical details!