Summertime is in full swing, and that means vacations, cookouts, lots of outdoor activities, and extra time with the family. Summertime is also full of opportunities for tax breaks. Read on for five ways to make summer work harder for you!
Tax Breaks for Summer Camp and Childcare
Summer camps are a great way for kids to stay occupied during the day while parents are working. If your school-age kids attend a summer camp, you can qualify for the Child and Dependent Care Tax Credit provided you’re working or actively seeking work. It’s not just summer camp: daycares and babysitters apply too. The tax credit is good for up to 35 percent of qualifying childcare costs, with a maximum of $3,000, for one child, or up to $6,000 for two or more dependents.
There are some caveats to be aware of. One, qualifying children must be age 13 or under. Two, overnight summer camps, tutoring, and schooling don’t qualify. And three, both spouses must have earned income throughout the year, so the tax credit doesn’t apply if one spouse is a stay-at-home parent without income.
There are two exceptions to this rule. If one spouse was a full-time college student at least five months of the year, then every month the spouse was in school he or she is considered to have had income, from the IRS’s perspective. The other exception is if one spouse was disabled. In that case, both spouses do not need to earn income to qualify for the tax credit.
Other expenses that qualify for the Child and Dependent Care Tax Credit include:
- Costs for a maid, cook, or housekeeper who also provides childcare;
- After-school care; and
- Nurse, home care provider, or other care provider for a disabled dependent.
Tax Rules for Yard Sales and Flea Markets
When you have unused items just sitting around, holding a yard sale or garage sale can be a good way to unload old belongings while taking advantage of the warm summer weather. Since they’re often sold for much less than they’re worth, there typically isn’t a need to report the income gained from yard sales or garage sales.
Flea markets, craft fairs, or farmer’s markets may be the exception, though. Items that are marked up in value may need to be reported as profits and losses, and you may need to collect sales tax on such items. Note that if any items are donated to a charity, simply save the receipt to deduct the items’ fair market value (if you itemize).
Tax Breaks for Employing Children
Owning your own business comes with perks, and one of those could be employing your children over the summer. If the kids are under age 18, their wages would be tax-deductible. And, if your business is a sole proprietorship, LLC taxed as a sole proprietor, or husband-wife partnership, you won’t need to pay Social Security or Medicare taxes for them. This post over on the Dental CPAs blog explains some duties that children can perform as well as some of the tax benefits.
Tax Breaks for Summer Rental Income
Summer means vacations, and if you own a second property, the vacation doesn’t have to be yours. Avoid paying rental income taxes and deduct qualified rental home expenses, provided you rent it out for no more than 15 days a year. That’s two weeks for another family to enjoy your condo or vacation home where you get paid twice – once from the rental fees and a second time from the tax deductions. It’s a win-win.
Tax Breaks for Vacations
If you’re going to a conference, traveling to meet clients, or otherwise taking a trip for work, you may be able to combine it with a personal vacation and deduct a portion of the trip. If the primary purpose of the trip is business-related – not the other way around – you may be able to deduct the cost of air travel, transportation, and lodging, as well as 50 percent of meals during the business portion.
This post from the Naden/Lean Blog Archives has much more information about traveling and deducting the cost of business trips, with a few vacation days added on. Although we wrote this post before the Tax Cuts and Jobs Act took effect, most of the guidelines are still in place.
Make sure to keep any receipts and records for items or activities you plan to seek a tax deduction for. And it’s a good idea to meet your CPA to talk about summertime tax planning strategies. Not only can your CPA help you take advantage of tax breaks, but you can also get a jump start on year-end planning before fall, when things almost always get busier.
So sit back, relax, and enjoy your summer … and remember there is always a way to save on taxes with a little planning and expert guidance! Contact us for more information.