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4 Something important nobody's mentioned yet - check if your parents are claiming you as a dependent on their US taxes! If they are, you can't claim education credits yourself. They would have to claim them based on any expenses they actually paid for your education. I learned this the hard way last year when both my parents and I tried claiming my education expenses (they paid for my housing, I paid for books and materials), and it caused a whole mess with the IRS that took months to sort out.
2 This is super important info! How can you check if your parents are claiming you? My parents and I don't really talk about taxes, but I'm pretty sure they might be claiming me since they send me some money every month for living expenses. Would that disqualify me completely?
4 The most direct way to check is simply to ask your parents if they're claiming you as a dependent. There's no database you can access to verify this yourself. If your parents are sending you money for living expenses, that doesn't automatically mean they're claiming you. The dependency test is more complex than that - it involves your age, student status, how much of your own support you provide, and other factors. If you provide more than half of your own total support for the year, your parents generally can't claim you even if they help with some expenses.
10 Quick tip about documenting those second-hand book purchases without receipts: take photos of the books with the course number and your name visible, screenshots of any electronic transfers you made to pay for them, and keep a spreadsheet with dates, amounts, and course information. Also save your course syllabi that show these materials were required. I did this for my study abroad in Spain, and it was enough documentation when I claimed the Lifetime Learning Credit. I got about $200 back, which wasn't huge but definitely helped!
23 This is super helpful! Would Venmo or PayPal transfers to classmates count as documentation? That's how I've been paying for most of my secondhand books.
Don't forget about state taxes on capital gains too! Depending on your state, you might owe additional tax on those gains. Some states tax capital gains at the same rate as ordinary income, while others have their own special rates. I got hit with an unexpected state tax bill last year because I only focused on federal.
Ugh I didn't even think about state taxes! I'm in California - does anyone know how they handle capital gains? Is it just added to regular income?
California taxes all capital gains as ordinary income at your marginal tax rate, which can go as high as 13.3% for high-income earners. There's no special capital gains rate like there is federally. So your $32,000 in gains will be taxed at your regular CA income tax rate. For other readers: States vary widely in how they handle capital gains. Some like Nevada, Florida, Texas, Washington, and Wyoming have no state income tax at all, so no capital gains tax. Others like New Hampshire only tax investment income.
Anyone know if tax loss harvesting is still worth it for offsetting capital gains? I have some stocks that are down about $8k this year and wondering if I should sell them to offset some of my gains from other investments.
Absolutely worth it! You can offset capital gains completely with capital losses, and if your losses exceed your gains, you can deduct up to $3,000 against ordinary income. Any remaining losses can be carried forward to future years. Just be careful of wash sale rules if you plan to buy back similar investments within 30 days.
Has anyone mentioned state taxes yet? If your state has income tax, you're probably behind on those too, and each state has different penalties and payment options. Don't forget to address both federal AND state when you're getting caught up!
Make sure when you file that you look into business deductions carefully. As self-employed, you can deduct legitimate business expenses like home office, equipment, software, professional development, travel for business, etc. This could substantially reduce what you owe. Might be worth consulting with a tax professional who specializes in self-employment taxes before filing.
I'm in a similar situation (expat, business owner, investments) and my return was 94 pages this year. What I do is focus on the key numbers and let my accountant handle the details. The big things to check are: - All income sources are included - Major deductions match your records - Foreign accounts are all listed - Your basis calculations look reasonable Don't try to understand every page or you'll go crazy. The tax code is ridiculous now, especially for expats. I literally just check the bottom line and sample a few key areas.
Do you ever worry about missing something big by just checking samples? I'm dealing with a similarly huge return and I'm paranoid I'm going to miss something that'll come back to bite me later.
Honestly, I used to worry about that constantly. But I've found that most major errors happen in the data input stage - like missing an income source or claiming an incorrect deduction amount. That's why I focus on verifying those elements instead of trying to check all the calculations. The calculation errors tend to be caught by the tax software anyway. I've had my accountant for 7 years now, and we've developed a system where he highlights any significant changes from previous years or areas where he had to make judgment calls. This approach has worked well - I've been audited once, and everything checked out fine. The peace of mind is worth the occasional risk of a small mistake.
Gosh I thought I was the only one! š« My tax return hit 108 pages this year. I'm an expat too with a small consulting business and some investments. The FBAR stuff alone was like 20 pages! My solution was to pay my accountant extra to walk me through the major sections over Zoom. Cost me an extra hour of his time but at least I understand the big picture components now. I still can't follow all the crazy calculations but I feel better knowing the inputs are correct.
That's actually a really smart approach. How much extra did your accountant charge for the walkthrough? Mine currently just sends me the finished return with a basic cover letter.
Rebecca Johnston
One thing nobody's mentioned yet - make sure you understand the timing requirements for S-Corp election. You need to file Form 2553 within 2 months and 15 days of the beginning of the tax year you want the election to take effect. If you miss that window, you're generally stuck waiting until next year (though there are some late election relief options). Also, keep in mind that an S-Corp must have a calendar year end (Dec 31). And once you start having the company pay your LLC, you'll need to keep clean books, potentially open a separate business bank account, and make sure you're segregating business and personal expenses.
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Vincent Bimbach
ā¢That's super helpful info about the timing! So if I want this for 2025 tax year, I'd need to file the S-Corp election by March 15, 2025? What if I form the LLC now in 2024 - does that change anything with the timing?
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Rebecca Johnston
ā¢If you form your LLC now in 2024 but want the S-Corp election to take effect for the 2025 tax year, you would need to file Form 2553 by March 15, 2025. If you plan to operate the LLC for the remainder of 2024 before the S-Corp election kicks in, your LLC would be taxed as either a sole proprietorship (single-member LLC) or partnership (multi-member LLC) by default for 2024, and then as an S-Corp starting January 1, 2025. During that interim period before the S-Corp election takes effect, you'd still be subject to self-employment tax on all profits. Many people form their LLC in Q4 of the year and then immediately file the S-Corp election for the upcoming year to minimize this interim period.
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Nathan Dell
Has anyone considered the other costs involved with S-Corps? I'm looking at this same transition and discovered: 1. State franchise tax in my state (CA) is $800 minimum per year just to have an LLC 2. I need a registered agent ($100-300/yr) 3. Payroll service fees ($40-60/month) 4. Accountant fees for S-Corp tax return (~$1000+) 5. Bookkeeping software ($25+/month) Plus the hassle of running payroll, maintaining corporate minutes, etc. Seems like you need to be making good money for this to be worth it.
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Maya Jackson
ā¢I'm in TX and we don't have the state franchise tax, so that saves a lot! My accountant says the breakeven point is around $60-70k in profit - below that and the administrative costs eat up the SE tax savings. Above $100k is where you really start seeing the benefits.
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