Effective tax planning is a year-round process. If you pause to consider the tax consequences of your current actions, you could end up saving big when it comes time to file your returns. To help you continue the process, here are some summertime tax tips!
Is your dependent old enough to consider a summer job? Generally, they won’t have to file a 2016 tax return if their annual earnings total less than $6,300. For parents operating sole proprietorships, any wages paid to a dependent under the age of 18 aren’t subject to Medicare and Social Security taxes. Finally, earning wages will also make your child eligible to make Roth IRA contributions up to either the amount of their total earned income or $5,500, whichever is less.
Sending the kids to day camp so you can work? You might be able to claim a credit for the expenses paid for your dependent(s) under the age of 13. Generally, the credit is for any expenses paid for the care (i.e. well-being and protection) of a person under the age of 13. The cost of food, lodging, education and entertainment aren’t considered qualified expenses, so overnight camps are out. Additionally, you (and your spouse if filing jointly) must have received earned income during the time your child was at camp (e.g. wages, self-employment income, commissions, etc.).
Buying a new boat or RV? Your sales tax could be deductible as an itemized deduction. If you live in a state that doesn’t have an income tax, this will help tremendously. You also might be able to deduct your interest payments as mortgage interest expenses. As long as the property has sleeping, eating and toilet facilities, it can be considered a second home.
Sell or Donate
Having a yard sale? Generally, any proceeds that you receive won’t be taxable because yard sale items are usually sold at a loss. However, if you do have items that have appreciated in value you may want consider donating them to charity. The deduction is equal to the fair market value of the donated property.
Upgrades for your home
Replacing your air conditioner? If you upgrade to a high-efficiency model, you could be eligible for the non-business energy property credit. But, there’s a lifetime limit of $500 and there are separate limits depending on the type of property you install. For high-efficiency air-conditioners, the limit is $300.
Did a storm cause property damage? Make sure to keep good records, as you may be eligible for the casualty loss deduction. A casualty is defined as the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. In order to figure your loss, you will need to determine the fair market value of the property both before and after the event. Any of the reduction in fair market value not covered by insurance is considered a casualty loss and is deductible as an itemized deduction to the extent that the loss exceeds 10% of your adjusted gross income (AGI), plus $100.
As always, feel free to reach out to your Moneta Group advisory team or Tax Strategies – we are here to help!