Friendly reminder that even if you use FreeTaxUSA, you can still deduct tax preparation fees as a business expense on Schedule C for your self-employment income! That includes any paid tax software. You just can't deduct the portion related to personal taxes or your rental (which would go on Schedule E). Also, don't forget about the home office deduction if you use part of your home regularly and exclusively for your self-employment work. That's a commonly missed deduction that can be significant.

I've been dealing with rental property and 1099 income for about 5 years now, and here's what I've learned: the first year is definitely the hardest because you're setting up all your depreciation schedules and figuring out what expenses are deductible vs. what needs to be capitalized. For your situation, I'd actually recommend starting with FreeTaxUSA since you're organized with your records. The software has gotten really good at walking you through rental property depreciation - it asks you the right questions about purchase price, improvements, land value, etc. The key is being conservative and keeping good documentation for everything. One thing that saved me money was keeping a separate spreadsheet throughout the year tracking all rental expenses by category (repairs, maintenance, insurance, etc.) and all my 1099 business expenses. This makes tax time much smoother regardless of which route you choose. If you run into specific questions while preparing your return, you can always pay a CPA for a consultation to review just those tricky areas rather than having them do the whole return. Many charge $100-150 for a review, which could give you peace of mind without the full $525 cost.

As someone who recently navigated this exact situation, I can confirm that your consulting income should qualify for QBI even while living in Portugal. The key is that "effectively connected with US trade or business" test - since all your clients are US-based companies and you're serving the US market, you meet this requirement regardless of your physical location. However, the FEIE/QBI interaction is crucial and requires careful analysis. At $142k income, you have several strategic options beyond just the standard "exclude $120k with FEIE, claim QBI on remaining $22k" approach that many people default to. Here's what I'd recommend modeling: 1. **Full FEIE approach**: Exclude $120k, claim QBI on $22k (saves ~$28,800 from FEIE + ~$1,056 from QBI) 2. **Hybrid approach**: Exclude $80-100k with FEIE, claim QBI on remaining $42-62k 3. **Minimal FEIE approach**: Exclude less, maximize QBI deduction The hybrid approach often wins because QBI gives you a 20% deduction on qualified income, which can be substantial on larger amounts. Plus, remember that FEIE doesn't reduce self-employment taxes anyway - you're paying 15.3% SE tax on the full $142k regardless. Since marketing consulting can fall under SSTB rules, document that your work is primarily strategic/advisory rather than hands-on creative execution. At your income level, you're well below the $182k threshold where SSTB limitations kick in. Also maximize your business deductions first - home office expenses (even in Portugal), international business communications, professional development, etc. These reduce your income before you even get to the FEIE/QBI decision. Given the complexity and potential tax savings involved, I'd strongly recommend running the actual numbers with a tax professional who understands expat situations. The optimal strategy varies significantly based on your total tax picture.

I'm a digital nomad who went through this exact situation last year while living in Romania with US clients. After extensive research and working with an international tax specialist, I can confirm you should qualify for QBI on your consulting income. The "effectively connected with US trade or business" requirement is met because you're serving US companies and directing your economic activities toward the US market - your physical location in Portugal doesn't disqualify you. The IRS focuses on economic substance, not where you sit while doing the work. However, the real strategy is optimizing the FEIE/QBI split. At $142k, I'd strongly suggest modeling scenarios beyond just the default "max FEIE + remaining QBI" approach. In my case with similar income, excluding only $90k with FEIE and claiming QBI on $52k actually saved me more in total taxes than maxing out FEIE at $120k. The 20% QBI deduction on the larger amount more than offset the additional income tax. Don't forget that FEIE doesn't reduce self-employment taxes anyway - you're paying 15.3% on the full amount regardless of which strategy you choose. This makes the QBI route more attractive since it provides real tax savings on income you're already paying SE taxes on. For marketing consulting, you'll likely fall under SSTB rules, but at $142k you're well below the phase-out threshold. Just document that your work is strategic/advisory rather than hands-on creative execution. I'd recommend running the numbers with scenarios of $80k, $100k, and $120k FEIE exclusions to see which maximizes your total tax savings. The optimal approach often isn't what you'd expect.

This thread has been incredibly helpful! I just received an "APA Treas 310 Misc" deposit this week and had no idea what it was for until I found this discussion. I filed an SS-8 about 4 months ago for a worker classification determination, and based on everyone's experiences here, this has to be related. The deposit amount matches almost exactly what 7.65% (employer portion of FICA) would be for the contractor income I reported, and the timeline aligns perfectly with what others have described. It's such a relief to see how consistently the IRS has handled these cases - I was honestly worried this might be an error that I'd eventually have to repay. Following everyone's advice, I've moved the money to a separate account and I'm organizing all my contractor documentation (1099s, payment records, original tax returns) so I'll be ready to file amended returns for other years if needed once I get the official explanation letter. The waiting is definitely stressful, but seeing how systematically this has worked out for everyone else gives me a lot of confidence. Thanks for starting this discussion - it's amazing how many people are navigating this exact same confusing situation right now!

This thread has been absolutely invaluable! I'm dealing with the exact same mystery deposit situation - just received an "APA Treas 310 Misc" deposit yesterday and I've been completely stumped trying to figure out what it's for. I filed an SS-8 about 5 months ago for a worker classification issue, and reading everyone's experiences here finally makes everything click into place. The deposit amount is almost precisely what 7.65% (employer portion of FICA taxes) would calculate to for the contractor income I reported, and the timeline matches perfectly with what everyone else has described. I was genuinely worried this might be some kind of IRS error that would eventually come back to bite me! Based on all the consistent advice here, I've already moved the money to a separate savings account and I'm going to wait for the official explanation letter before doing anything with it. I'm also gathering all my contractor documentation now (1099s, payment records, original returns) so I'll be prepared to file amended returns for other affected years if needed. The waiting for confirmation is definitely nerve-wracking, but seeing how systematically and consistently the IRS has handled these SS-8 refunds for everyone gives me tremendous confidence. It's remarkable how many of us are navigating this identical confusing experience right now - the IRS really needs to improve their communication by sending explanation letters WITH these deposits to save everyone the stress and uncertainty! Thanks to everyone for sharing their experiences. This community support has been a huge relief during what was becoming a very anxious situation.

One thing I learned the hard way - keep really good records of all the expenses related to the property between inheritance and sale! We paid property taxes, insurance, some repairs, and utilities while the house was on the market. These costs can often be deducted from your proceeds when calculating your gain. Our sale was last year, and I'm STILL trying to track down all these expenses because I didn't keep good records. 🤦‍♀️ Don't be like me!

Great question! Yes, HOA fees paid between inheritance and sale are typically deductible as selling expenses. These are considered costs of maintaining the property while it's being marketed for sale. Keep all your HOA payment receipts and any other maintenance costs like utilities, insurance, property taxes, and repairs during the holding period. Just make sure to only deduct your 50% share of these expenses (matching your ownership percentage) when you report everything on Form 8949. Your brother should deduct his 50% share on his return. Also, since this is a condo, don't forget to check if there were any special assessments during that time period - those would also be deductible if you paid them while preparing the property for sale.

Great question about adjusting withholding after buying a home! I went through this exact situation a couple years ago. One thing to keep in mind is that the mortgage interest deduction isn't as straightforward as it used to be since the Tax Cuts and Jobs Act increased the standard deduction significantly. Before making any W-4 changes, I'd recommend calculating whether you'll actually be itemizing or taking the standard deduction. For 2024, you need more than $14,600 in itemized deductions as a single filer (or $29,200 if married filing jointly) to beat the standard deduction. This includes your mortgage interest, property taxes, state income taxes, and any other deductible expenses. If your total itemized deductions don't exceed the standard deduction, then buying the house won't actually change your tax liability much, and you might not need to adjust your withholding at all. If you will be itemizing, then yes, definitely use one of the tools mentioned here like the IRS withholding calculator or consider talking to a tax professional. They can help you figure out the exact adjustment needed based on your specific situation.

This is exactly why I love this community - so much helpful advice! As someone who works in tax preparation, I'd add one more consideration: timing your withholding adjustment strategically throughout the year. Since you bought in March, you'll have 10 months of mortgage interest to deduct this year. But next year you'll have the full 12 months, which means your tax situation will be different between this year and next year. My suggestion would be to calculate your withholding adjustment based on this year's partial mortgage interest first, then plan to readjust your W-4 again in January for the full-year impact. This prevents you from over-adjusting and ending up owing money at tax time. Also, don't forget about property taxes if you're escrowing them - those count toward your itemized deductions too and can make a significant difference in whether itemizing beats the standard deduction. The tools mentioned here (IRS calculator, TurboTax calculator, taxr.ai) are all solid options. Pick whichever interface feels most comfortable to you and run the numbers!