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Ask the community...

  • DO post questions about your issues.
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  • DO NOT post call problems here - there is a support tab at the top for that :)

Natalie Chen

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One thing to consider - some states have different rules about this credit than federal. I'm in Georgia and they required more specific documentation than the IRS did. Make sure you check your state requirements too if you're claiming on both returns.

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This is a really good point! In Texas they wanted an actual signed affidavit from the doctor instead of just a letter, and my friend almost got her state return rejected because of this difference.

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I'd be careful with this. A friend claimed this credit and got audited. Even with doctor's documentation, the IRS agent was super picky about the exact wording. They wanted documentation specifically stating "detectable heartbeat present before December 31" not just "approximately 6 weeks pregnant by Dec 31." Slight wording differences caused her huge headaches.

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Caesar Grant

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Has anyone asked the company directly how they handle the tax reporting for these credits? My employer provides a statement at year-end showing the cash value of all non-cash compensation, including reward points and credits. Maybe your company has some documentation they can provide.

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Naila Gordon

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I actually tried that initially! The company said they don't report these credits anywhere because they consider them "promotional incentives" rather than compensation. They told me it was my responsibility to determine the value and report it correctly. That's exactly why I'm so confused about how to handle it.

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Caesar Grant

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That's definitely making things more complicated then. In that case, I would document everything carefully - when credits were earned, their approximate cash value, and how you calculated that value. The fact that the company calls them "promotional incentives" doesn't change your tax obligations, but it does make record-keeping more important. If you're self-employed, these would still be business income on Schedule C. Consider consulting with a tax professional who specializes in self-employment or sales compensation structures to ensure you're covered.

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Lena Schultz

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One important thing nobody mentioned - if these credits are being used for business expenses, you might be able to offset the income with the business expense deduction when you actually use them. I'm not a tax pro, but my accountant had me track when I used my sales credits for business supplies, and we deducted those as business expenses in the year used.

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This is actually really good advice. If you're tracking the credits as income when earned, then using them for legitimate business expenses later, you should be able to deduct those expenses when incurred. Just make sure you're not double-counting!

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3 One thing nobody mentioned yet - if you use your car for both personal and business, and the business use is less than 50%, you CANNOT use Section 179 deduction and have to use standard depreciation with the date placed in service being when you first used it for rideshare.

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17 Is that also true if you're leasing the car? My tax software is asking for all this info but I don't own my vehicle.

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3 For leased vehicles, it works differently. You generally can't claim depreciation or Section 179 on a leased vehicle because you don't own it. Instead, you can deduct the business portion of your lease payments as a business expense. You still need to track your business vs. personal use percentage, but you'll apply that percentage to your lease payments rather than calculating depreciation. The "date placed in service" would still be when you first started using the leased vehicle for business purposes, but it's used differently in your tax calculations.

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14 Does anyone use a dedicated app to track their mileage for rideshare? I'm trying to be more organized this year and want recommendations.

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2 I use Stride. It's free and automatically tracks your miles while you drive. You can categorize trips as business or personal, and it calculates your potential tax deduction based on the current IRS mileage rate. It also lets you track other expenses like car washes, phone bills, etc. Been using it for 2 years now and it makes tax time way easier.

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PrinceJoe

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Just FYI - a lot of tax preparers get this wrong because they confuse different tax rules. For the Child Tax Credit, a baby born December 31st qualifies the same as a baby born January 1st. But for some other tax benefits, like certain childcare credits, there are different rules about timing. Make sure whoever prepares your taxes knows the specific rules for CTC. And definitely don't pay for preparation if they're going to cost you $3,600 in credits you deserve!

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Is there any official IRS documentation we can point to that specifically states this? My husband doesn't believe me that our November baby qualifies us for the full amount.

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PrinceJoe

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Yes! Check IRS Publication 972 (Child Tax Credit) which states that a child who was born or died during the year is treated as having lived with you for more than half of the year if your home was the child's home for more than half the time they were alive during the year. Since your home was presumably your November baby's home for their entire life in 2024 (even if that was just 2 months), they qualify as having lived with you for more than half the year. There's also IRS Publication 501 which clarifies dependent qualifications and specifically addresses children born during the tax year.

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Owen Devar

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In case anyone finds this thread later - I'm a longtime tax preparer (not with any of the big chains) and can confirm that a baby born anytime in 2024, even December 31st, qualifies for the full $3,600 Child Tax Credit. There is absolutely NO 6-month rule for this. The confusion might come from other tax benefits or perhaps old rules. Always make sure your tax software or preparer is up-to-date on the current year's tax laws.

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Which tax software do you recommend for situations like this? I've been using H&R Block online but now I'm worried they might get this wrong too.

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Owen Devar

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In my experience, all the major tax software programs (TurboTax, H&R Block, TaxAct, FreeTaxUSA) correctly handle newborns and the Child Tax Credit. The issue isn't usually with the software itself but with individual preparers who might be misinformed. If you're using the software yourself rather than going to a preparation office, just make sure you answer all questions about your new dependent accurately, including their date of birth and SSN. The software will automatically calculate the correct credit. If the software seems to miss the credit, double-check that you entered all information correctly, especially the child's SSN which is required for claiming the CTC.

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Don't forget about the AMT implications with ISOs! Even if you have a disqualifying disposition, you might still need to figure out if you paid any AMT in the year you exercised. If you did, you might be eligible for an AMT credit. The whole ISO system is ridiculously complicated. When I exercised some ISOs in 2022, I had to pay AMT that year. Then when I sold in 2023 (disqualifying disposition), I got ordinary income but was also eligible for an AMT credit. Make sure you're tracking all this stuff.

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I'm honestly not even sure if I paid AMT when I exercised these. How would I know? Would it have been obvious on my 2023 return or is this something that could have happened without me realizing it?

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Check your 2023 tax return for Form 6251 (Alternative Minimum Tax). If you paid AMT, it would show up there and on line 1 of Schedule 2 of your Form 1040. If you did pay AMT in 2023 when you exercised, you'll likely be eligible for an AMT credit on your 2025 return (for the 2024 tax year when you sold). You'll need to file Form 8801 (Credit for Prior Year Minimum Tax) along with your return. This credit can potentially offset some of the tax impact from your disqualifying disposition.

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Something else to consider with ISOs - if your company is private or was private when you exercised, the calculation of the bargain element can get really messy. Companies use 409A valuations which might not match what you think the shares are worth. My company went public 8 months after I exercised some ISOs and the 409A value at exercise ($12/share) was WAY lower than the IPO price ($47/share). I made a disqualifying disposition but the bargain element was calculated based on the lower 409A value, not the public market value when I sold.

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Yep, this happened at my last job too. But be careful - some companies mess up the reporting on disqualifying dispositions. My employer reported the wrong amount on my W-2 (they used the sale price instead of FMV at exercise for calculating the ordinary income). Had to get an amended W-2 which was a huge hassle. Double-check your W-2 when you get it!

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