You might think tax season is in the rearview mirror, but this summer could have something in store for this year’s tax planning. Take action now to get some great benefits and deductions. If you’ve already been following some of this advice, be sure to tell your accountant so you can get the most on your next return. You don’t want to miss out on these helpful tax tips!
5 Ways Summer Can Help with Your Taxes
Being able to plan ahead for the summer season can lead to some smart financial rewards. For savings both now and down the road, consider trying some of these tax-saving practices.
1. Schedule a Property Rental
If you own a cabin, condo, or other vacation property, why not rent it out for a couple weeks this summer? As long as long as you don’t go over 15 days in a given year, anything you earn from renting your property won’t be considered taxable income. Plus, you can still use itemized deductions for your mortgage interest expense and property taxes. When you have the option to rent your property, this can be a great financial move.
2. Take Credit for Summer Childcare
Working parents often need to juggle childcare options throughout the summer. Fortunately, the Child and Dependent Care Credit can cover a percentage of qualified expenses. If your children are under age 13, you might be able to offset 20-35 percent of the costs for day care or day camp fees, as well as nanny pay. Your overnight camps or summer school won’t qualify, but it’s nice to know you have other ways to save.
3. Hire Your Kids
Small business owners might be able to give their children some valuable work experience in the summertime. What’s more, you won’t need to withhold or pay Social Security and Medicare tax when you hire your own child (under age 18). This is a win-win deal for sole proprietors!
4. Plan a Garage Sale
Turning your unwanted furniture and belongings into cold, hard cash is a great goal for the summer. Your earnings from garage sales are tax-free because you’re often selling for less than what you initially paid. Then, if you want more help with your taxes, make arrangements to donate the remaining items to a local charity. It’s always nice to support a good cause, plus you can potentially get a deduction when you have a donation log or itemized receipt.
5. Set Up Your Child’s Roth IRA
Contributions to a Roth IRA are limited to what your child earns, so the summer is a great time to start reviewing your setup. Encourage your children to mow lawns, pet sit, or sell lemonade to earn money during these months. Then you can begin making your own contributions and get the advantages of the tax-free Roth IRA earnings.
For more tax planning advice, our team at NSO and Company is here to help! Let us know if you’d like to schedule a meeting to discuss your goals for this year and the next. Call us at (317) 588-3131 with other tax questions, too. We’re always happy to help!
