Summer is a great time to start tax planning even though it’s probably the last thing on your mind! Here are some tips that could help you save money at tax time:
Deduction of Summer Camp Expenses:
If you have to pay someone to care for your children so you can work (or look for work), you can get a tax break for the expense through the “Dependent and Child Care Credit.” If married, both partners need to be working or looking for work!
Summer Job Tax Tips :
If you are claimed by someone else as a dependent (generally a child) and you earn a total income of $6,200 or less during the year, you generally will not owe taxes or be required to file a tax return. However, there can be some exceptions.
Many kids during the summer may take on a part-time job babysitting or mowing lawns. These jobs are considered self-employment. If your net income (income – expense) from self-employment is over $400, the IRS requires you to pay self-employment taxes.
There are jobs such as waiters and camp counselors where you may receive cash tips. Tips are considered part of your taxable income, and the IRS required you to report them if the tips from any one job total $20 or more.
If parents employ their children (under age 18) in their businesses, as long as they do not pay them over the $6,200 (in W2 wages) for the year, the kids do not have to file a tax return, and the parents benefit from the expenses.
Tax-Free Summer Rentals:
If you have a summer/vacation home, you can rent it out for up to 15 days a year without paying taxes on the rental income, and you can deduct the qualified expenses for the home on Schedule A (i.e. mortgage interest & real estate taxes).
Energy-Efficient Home Improvements:
Summertime can be exceptionally HOT in many parts of the country, which causes you to use extra energy to keep cool. If you install certain “qualified” renewable energy sourced in your home, you can get a tax credit up to 30% of the total cost (as well as save money in utility bills). This tax credit is only good on homes that you own!
Yard Sales and Flea Market Season:
If you are having a garage sales or yard sale, generally these sales are tax-free because your used items are sold for much less than what you bought them for. On the other hand, if you sell items which you have marked up in value at a Flea Market, Farmer’s Market, or Craft Fair, you will probably need to report your profits & losses and pay self-employment tax as well as sales tax.
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