Summer is usually the time for relaxing, but it can also be a time for tax savings, especially if you’re still reeling from an unexpectedly large tax bill in April. Here are four timely tips:
Rent your home
If you rent out your main home or a vacation home part of the time, you may be entitled to deductions like other landlords. This includes the rental-related portion of mortgage interest, property taxes, repairs, utilities, and insurance. Keep in mind, if your personal use exceeds certain limits, you can’t deduct a loss. And if you rent for less than 14 days, the rental income is tax free!
Send young kids to camp
Depending on your situation, you may be able to claim a Child and Dependent Care Tax Credit for the cost of sending children under age 13 to summer day camp. However, the cost of overnight camp doesn’t qualify for the credit.
Hire your child
If you have an older child looking for employment this summer, hire them to work for your business. Reasonable wages are deductible by the business and your child will likely owe little tax, if any, on the earnings. Plus, they may be eligible for other employee benefits.
Take a business trip
Spend some time seeing a different city this summer while you’re on a business trip. When you travel for business, you can generally deduct expenses — including airfare, lodging and 50 percent of the cost of meals — attributable to the business portion of the trip. But you must spend more time on business matters while you’re away than you do on sightseeing or other personal activities.
Leverage a child’s earned income
If you have a young worker who earns money from mowing lawns or babysitting, be sure to keep track of their earnings. While they will probably earn too little to pay tax, this earned income allows the young worker to open a Roth IRA. You could even decide to gift money into the account as long as it’s less than the earned income amount.
Finally, summer is a great time to create a full-year tax projection. Use this information to determine if the steps you’re taking now will help you avoid a large tax bill at the end of the year. Call today to schedule a review of your situation to help manage your full-year tax bill.
James Angell is a Willits based Certified Public Accountant. His office is located at 461 S. Main St. and he can be reached at 707-459-4205.
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