Mid-Year, Late Summer Tax Planning Tips

Getting married greatly affects your tax situation. Though taxes may be the last thing on your mind, being prepared tax-wise when you tie the knot can easily help you file your return next year. Here are some things to remember:

• Review your tax return filing status: if you get married on or before December 31 of a given tax year, you’re considered be married for the entire year for tax purposes and must file as married filing jointly or married filing separately. Take a close look at both of your incomes; if you file jointly, your tax brackets might change as well.
• With a new filing status, re-assess your paycheck tax withholding: You and your spouse will want to coordinate your paycheck tax withholding by increasing or decreasing the amount on Form W-4. Your goal is to make sure your W-4 information matches the amount of tax that’s withheld from your pay so you neither receive a large tax refund or owe tax when you file your return next year.
• Review and/or update your name and address changes with the IRS. Make sure you inform the Social Security Administration of your name change after getting married (the administration will send the information to the IRS). Use Form SS-5, Application for a Social Security Card, and report to the IRS your address change if you moved to a new residence with your spouse. That way, there would be no delays on processing your filed tax return. Use Form 8822, Change of Address – FileIT.
• Take a fresh look at taxes and health insurance. See details on the health insurance related the Premium Tax Credit. If you and/or your spouse purchased health insurance from the Marketplace, make sure the Marketplace knows about your new married status. That way, the Marketplace can update your Premium Tax Credit amount and you won’t be surprised by a smaller refund or a higher taxes owed amount when you file your return.

Learn more about how getting married affects your tax return.

Summer Camp Expenses

Do you have kids that go to summer camp? If you have to pay someone to care for your children so you can work or look for work, you can get a tax break for the expenses. It doesn’t matter whether you send your kids to day care or to day camp this summer (overnight camps don’t qualify), you can count the costs toward the Child and Dependent Care Credit. Read all the details on the Child and Dependent Care Credit.

Keep in mind that you must be working or actively seeking employment in order to qualify for the Child and Dependent Care Credit. If you are married, both you and your spouse must be working or looking for work. The job-seeking must pay off at some point during the year because both spouses must have earned income in order to claim the credit. Unfortunately, stay-at-home moms or dads do not qualify.

Taxes and Yard Sales

If you are having a garage sale or yard sale this summer, you may wonder if you need to worry about taxes. These types of sales are 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. On the other hand, if you sell items which you have marked up in value at a flea market, farmer’s market, or craft fair, you will probably need to report your profits and losses, pay self-employment tax, and collect sales tax. Additionally, taxes may be owed if you sell valuable collectibles – see capital gains.

Should you accept Venmo or online payments or make it cash only?

Have unsold items that are in good condition? You can donate them to charity and deduct their fair market value. Since you need to itemize the deductions, make sure that you keep receipts or other documents as proof of your donations in case the IRS sends you an audit notice.

Other Summer Tax Situations

Mileage for Charity

Though you cannot donate your time towards a charitable cause, you can claim an itemized deduction for driving a personal vehicle and donating services on your trip. Check out what you can deduct in current, future, and past tax years for mileage. Keep all mileage records in case the IRS asks for them after reviewing your accepted tax return.

Tax Breaks for Employing Children

Do you own a business? If you have children under the age of 18, you can hire them to work for you and then deduct the wages you pay them from your own taxable income. If you employ your children to work while they are off from school, this may apply to you. Furthermore, if you operate a sole proprietorship, you can employ your children without having to pay any Social Security or Medicare taxes on their wages. If the child is also under 21, their payments are not subject to the Federal Unemployment Tax Act (FUTA) tax. Make sure you pay them an amount that is reasonable and based on the work they are performing in order to avoid an IRS tax audit.

Summer Rental Income

Do you have a summer home or vacation property, such as a house, condominium, apartment, boat, mobile home, or similar property? You can rent it out for up to 15 days a year without paying taxes on the rental income and you can deduct the qualified expenses for the rental home on Schedule A of your tax return. Consider renting your property during the summer to someone looking for a summer vacation; see how to file rental income via Schedule E.

If you paid mortgage interest on your second home, don’t forget to deduct the mortgage interest. Additionally, see deductible home improvement expenses.

Gambling Winnings

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.

Tax Credits and Home Energy Efficiency

Summers can get exceptionally hot in many parts of the country, so you may use a lot of extra energy to keep cool. When you install certain renewable energy sources in your home, you can claim the Energy Efficient Property Credit or the Residential Clean Energy Credit and even save money on utility bills. This credit is restricted to your primary residence except for fuel cell properties and it may not be claimed for newly constructed homes – review other criteria on the page linked earlier. Find home deductions for improvements made during the summer.

Additionally, if you invest in a clean energy vehicle, you may be able to claim credit for that as well.

Storm Damages

Unfortunately, many people will suffer property damage in summer due to storms, tornadoes, wildfires, and other natural disasters. If this happens to you, you can deduct the reduction in value of your damaged property as a casualty loss on your return if your home county has been declared a federal disaster area. You may get additional tax breaks, such as extended deadlines, or the right to file immediately to claim your casualty loss benefits.

Keep Copies of Tax Records

Now is a good time to make sure your personal tax records are up to date. We also recommend that you print your tax return each year and keep a hard copy for your records.

File Your Tax Return After Filing a Tax Extension

If you e-filed an IRS extension for your tax return by April, you have until October e-file your return. This gives you all of summer to gather your important documents in order to prepare to file your taxes. Check your state(s) regarding extensions and deadlines.

Waiting to file because you don’t have the money to pay your taxes? You might want to know that not filing is more expensive than not paying. Find out about the penalties for not filing a tax return and for not paying.

Prepare for Next Tax Season

Though Tax Day is not until next April, it’s never too early to think about how to tax plan! Check out this tax checklist and prepare to prepare this tax season.

There are simple things you can do all year round to save money on taxes and other expenses. Check out some practical money-saving tips and ways to save on everyday expenses and bills.

_________________________________________

Source: efile.com

Image: freepik