Five Summer
Tax Savings Opportunities
Ah,
summer. The weather is warm, kids are out of school, and it’s time to think
about tax saving opportunities! Here are five ways you can enjoy your normal
summertime activities and save on taxes:
- Rent
out your property tax-free. If you have a cabin,
condo, or similar property, consider renting it out for two weeks. The
rental income you receive on property rented for less than 15 days per
year is not considered taxable income. In addition, you can still deduct
your mortgage interest expense and property taxes in full as itemized
deductions!. Track the rental days closely — going over 14 days means all
rent is taxable and rental income rules apply.
- Take
a tax credit for summer childcare. For many working
parents, the summer comes with the added challenge of finding care for
their children. Thankfully, the Child and Dependent Care Credit can cover
20-35 percent of qualified childcare expenses for your children under the
age of 13. Eligible types of care include day care, nanny fees and day
camps (overnight camps and summer school do not qualify).
- Hire
your kids. If you own a business, hire your kids. If
you are a sole proprietor and your child is under age 18, you can pay them
to work without withholding or paying Social Security and Medicare tax.
- Have
a garage sale. In general, the money you make from a
yard or garage sale is tax-free because you sell your goods for less than
you originally paid for them. Once the sale is over, donate the remaining
items to a qualified charity to get a potential charitable donation
deduction. Just remember to keep a log of the items you donate and ask for
a receipt.
- Start
a Roth IRA for your children. Roth IRA contributions
are limited to the amount of income your child earns, so earned income is
key. This can include income from mowing lawns or selling lemonade. Start
making contributions as soon as your child makes some money to take
advantage of the tax-free earnings available in a Roth IRA.
Taking
the time this summer to execute these tips can put extra money in your pocket
right away and provide you tax-saving happiness in the future.
