Summertime is ideal to reassess your tax strategy and overall income situation and look to rectify mistakes made during the tax season and stay in good stead for the rest of the year. Here we are discussing and providing a few summertime tax tips for you.
Quarterly payments protect you from paying penalties or owing a significant amount by the end of the year. If you are claimed by someone else as a dependent and you earn a total income of $5,800 or less during the year, you generally will not owe taxes or be required to file a tax return. If this is the case, you may want to claim “exempt” on your W-4(s). Your employer will still withhold Social Security and Medicare taxes, but not income taxes.
In order to itemize & track expenses, consider placing your receipts and payment invoices into a file folder labeled with the current year. Once you add up the receipts, a quick comparison to your given standard deduction can assist in determining which one to claim. If self-employed, you can also pick through the receipts to subtract costs of operating your business out of your home.
If you own a summer home or vacation property, you can rent it out for up to 15 days a year without paying taxes on the rental income. You can also deduct the mortgage interest paid on your second home.
If your net income from self employment (Babysitting, lawn mowing, delivery jobs, et al) is $400 or more, the IRS requires you to pay self-employment taxes. Tips are considered part of your taxable income, and you are required to report them if the tips from any one job totals $20 or more.
A garage or yard sale is generally tax-free, because your used items are sold for much less than for what you bought them, making the “cost of goods sold” much higher than the selling price. If unsold items left over from such sales are in “good used” condition, and if you itemize deductions, you could donate them to charity and deduct their fair market value.
If you have kids enrolled in a summer camp or you pay someone to care for them while you work, you can get a tax break for the expenses. You can consider this cost towards the Dependent and Child Care Credit.
Even if you do not make enough money from your summer job to file a tax return, you may still want to file a return. If your employer withheld too much tax from your paycheck, you will need to file a return in order to receive a tax refund.
If you visit a casino during your summer vacation, you will need to report any gambling winnings on your tax return. You can deduct your gambling losses if you itemize deductions, but only if you have winnings that are equal to or greater than the amount of your losses.
When you install certain renewable energy sources in your home, you can get a tax credit worth up to 30% of the total cost, as well as save money on utility bills. In case your property has suffered damage this summer due to storms, tornadoes, wildfires, and other natural disasters, you can deduct the reduction in value of your damaged property as a casualty loss on your tax return. Hope you have got some essential summertime tax tips which can be implemented to reduce tax cost.
For crucial insights into your tax situation and suggestions on how best to apply deductions & assign credits, get in touch with your tax experts at GKM.
