11 Wouldn't a 1031 exchange only work if both properties are investment properties? OP's house is currently their primary residence, so I don't think that would qualify.

3 You're right, and that's an important distinction. For a 1031 exchange to work, the property must be held for investment or business purposes. In OP's case, they would need to convert their primary residence to a rental property first, rent it out for a period (usually at least a year), and then they could potentially use a 1031 exchange. Alternatively, OP could look into the primary residence exclusion, which allows you to exclude up to $250,000 ($500,000 for married couples) of capital gains when selling your primary residence if you've lived there for at least 2 of the last 5 years.

19 Yeah this is super important! When I converted my home to a rental last year, my accountant explained that the basis for depreciation becomes the LOWER of either your adjusted basis or the fair market value at the time of conversion. This made a big difference in my depreciation calculations.

2 You're absolutely right. When converting a primary residence to a rental property, the depreciation basis is the lower of the adjusted basis (original cost plus improvements, minus any depreciation already taken) or the fair market value at the time of conversion. This is an important point because it affects how much depreciation can be claimed each year, which is a significant tax benefit of owning rental property. Also, don't forget that land isn't depreciable, so the basis needs to be allocated between the building (depreciable) and land (non-depreciable).

Is this kind of error common? Seems like a major screwup that could mess with people's taxes.

Oh that makes sense! I thought they just sent me duplicates by mistake. So much about taxes is needlessly confusing lol.

Interesting point! I actually made this loan with the intention of potentially becoming a partner in the business later, so there was a business motive beyond just earning interest. Would that help establish it as a business rather than personal loan?

That business connection definitely strengthens your case for treating it as a business bad debt. Keep any emails or documents that show discussions about partnership or business involvement. The key distinction the IRS looks for is whether you made the loan as an investment with business interests or simply as a personal loan. If you can document that connection to your own business activities or potential participation in their business, you're in a much better position to claim it as a business bad debt, which gives you the more favorable ordinary loss treatment rather than capital loss limitations.

This is so important! My accountant told me the IRS is particularly picky about the timing of bad debt deductions. They expect you to take reasonable steps to collect before claiming worthlessness, but also don't want you waiting years after it's clearly uncollectible.

That's such a good point. Do you think it's a red flag if they're still using mostly paper documents instead of digital systems?

It's not necessarily a deal-breaker if they use paper documents, but it's definitely something to consider. In my experience, CPAs who have embraced secure digital document sharing, e-signatures, and modern client portals tend to be more efficient and organized overall. These systems create automatic backups and make it easier to find information quickly. That said, some excellent accountants still prefer traditional methods. If they use paper but have rock-solid systems for tracking and organizing everything, that can work too. The real red flags are disorganization, frequently misplacing documents, or making you resend information multiple times regardless of whether they're using paper or digital systems.

This is so important. My CPA gives me an estimate range before starting work, and if something comes up that will push it higher, she calls to discuss first. That transparency is worth its weight in gold.

Quick question - if the county website shows a different amount than what's on my mortgage statement, which one should I use for my tax return? My county site shows $4,120 but my mortgage escrow statement shows $3,985.

You should use the amount that was actually paid during the tax year, regardless of what was billed. The difference you're seeing is likely due to timing - maybe your mortgage company paid part of one year's taxes in the previous or following calendar year. Look at the payment dates on your county website. If you're filing taxes for 2024, you want to report the total property tax payments that were actually made during calendar year 2024 (January 1 - December 31), regardless of which tax year they were applied to by the county.

Thank you everyone for all the helpful advice! I managed to find exactly what I needed by checking my escrow statements online. Turns out my lender does include the property tax info on the 1098, but it's split between two different boxes and labeled weirdly. For anyone else struggling with this: definitely check your online mortgage account for the escrow analysis or year-end statement, which breaks everything down clearly. And the county tax website was super helpful too!