Ask the Editor: Reader Questions, April 18 — Amended Returns

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, she’s looking at questions related to amended returns, reverse mortgages and depreciation deductions. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

Q1: Amended returns

I mailed amended tax returns on Form 1040-X to the IRS in early January. They show up in the IRS system as received by the agency, but I have not yet received my refunds. Do you know when I might see my money?

The IRS is still lagging on processing amended returns. The delay began with the COVID-19 pandemic, and the IRS has not yet fully caught up. But the wait isn’t as bad as it used to be. The IRS says that it is now processing amended paper-filed returns that were received in January 2025, so you should see your refund shortly. Note that the IRS’s processing time is longer for paper returns with errors or paper returns that require special handling. You might want to check the IRS’s online tool, Where’s My Amended Return.
— Joy Taylor, Editor The Kiplinger Tax Letter

Q2: Reverse Mortgages

I am planning to take out a reverse mortgage on my primary home. Will I have to pay federal income tax on the money that I receive in the transaction?

No. The payments you get from a reverse mortgage are treated as nontaxable loan proceeds, not income. Also, if you itemize, you cannot deduct, on Schedule A of the Form 1040, the interest you eventually pay because you are not using the reverse mortgage proceeds to buy, build or substantially improve the home securing the mortgage.
— Joy Taylor, Editor The Kiplinger Tax Letter

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Q3: Converted Rental Property

I bought a home in 2008 for $294,000 that I used as my primary residence. In 2014, when the property was valued at $225,000, I moved and converted the home to a rental property. I then used $225,000 to calculate depreciation on the rental property. I sold the home last year for $362,000. What is the tax basis for determining the gain on the sale of the rental home?

First, you were correct to use the $225,000 amount for figuring annual depreciation deductions when you converted your primary home to a rental property. Second, since you sold the rental property at a gain last year, your tax basis for determining your gain is the original cost of the home ($294,000) plus any amounts you paid for capital improvements, less depreciation that you deducted on the home. If you had sold the rental home for a loss, your basis starting point would have been the lower of your original basis ($294,000) or the value when you converted the home to a rental ($225,000).
— Joy Taylor, Editor The Kiplinger Tax Letter

Q4: Investment Subscription Costs

I am aware that I cannot deduct the fees I pay to my broker to manage my investments. However, can I deduct the costs of subscriptions to stock advice letters, some of which are quite expensive?

No. Unfortunately, you cannot deduct the cost of subscriptions to stock advice letters unless you use that information in your trade or business. This type of investment expense used to be deductible as a miscellaneous itemized deduction on Schedule A of the Form 1040 (subject to the 2%-of-adjusted-gross-income limit), but the 2017 Tax Cuts and Jobs Act temporarily eliminated that entire group of deductions through the end of 2025. It’s too soon to know whether you would be able to deduct the costs for 2026 and later years. Republican lawmakers are currently negotiating a big tax package that would extend many of the expiring provisions in the Tax Cuts and Jobs Act.
— Joy Taylor, Editor The Kiplinger Tax Letter

Q5: Deducting One’s Time

Can a self-employed person deduct the value of his or her time on Schedule C of the Form 1040?

No. A self-employed person cannot deduct the value of his or her time. As the United States Tax Court said in a recent case, “labor performed by a taxpayer does not constitute an amount paid or incurred by him, and the taxpayer is not entitled to deduct the value of such labor.”

Also, if a self-employed person pays wages to himself or herself, he or she cannot deduct the wages on Schedule C because he or she isn’t employed by the business for tax purposes. The person can take withdrawals from his or her Schedule C business, but those withdrawals aren’t taxable and aren’t deductible.
— Joy Taylor, Editor The Kiplinger Tax Letter

We have already received many questions from readers on topics such as leasing a car for business use, what to do with unused funds in a 529 college savings plan, using U.S. savings bonds to pay for college and much more. We’ll answer some of these in a future Ask the Editor round-up. So keep those questions coming!

Subscribers of The Kiplinger Tax Letter can ask Joy questions about a tax topic. You'll find full details of how to submit questions in The Kiplinger Tax Letter. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

Read more

• Ask the Editor, April 11, 2025: Questions about IRAs, RMDs and PTPs.
• Ask the Editor, April 4, 2025: Questions about the new tax bill, estate tax, and muni bonds.
• Ask the Editor, March 28, 2025: Questions about filing tax returns, QBI deductions, and estimated tax payments.
• Ask the Editor, March 21, 2025: Questions on reporting income and deductions.