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As the sun shines bright and the days get longer, many of us are getting ready for a fun summer ahead. Just a heads up – some of the summer activities we enjoy can affect our taxes next year. Whether you’re tying the knot, sending the kids to camp, working a summer job, renting out your place, or making home improvements, it’s good to know how these can impact your taxes. Check out these tips to stay organized and prep for next year’s tax season.
Getting Married
Summer is often called the peak wedding season, with many couples choosing to get married between May to October. If you’re thinking of saying “I do” this summer, congratulations! Just keep in mind, tying the knot can have tax implications. Marriage can change your filing status and possibly move you to a different tax bracket. It’s a good idea to chat with an experienced CPA to see how this big life step could affect your taxes.
Pro tip: You can check the IRS’ Tax Withholding Estimator to get an idea of your tax liability after getting married.
Sending the Kids to Summer Camp
Summer camp can be a lifesaver for working parents. Some summer camps don’t just cater to childcare – they offer specialized sports, arts, music, or academic programs that can benefit our kids. But did you know that you may be able to claim a tax credit for this expense? You can claim the Child and Dependent Care Credit for children under the age of 13 who are in childcare while you are at work. Just make sure you keep track of your expenses and check with a tax professional to see if you qualify.
Pro tip: Keep receipts, invoices, and other records of your summer camp expenses in case you need to prove the cost for the tax credit.
Earning Money from a Summer Job
Summer is a great time for students and young adults to earn some extra cash through summer jobs. But even if it’s just a temporary job, you still need to report your income to the IRS. Any income earned over $400 must be reported on your tax return – so make sure you keep track of how much you’re making. You may also be eligible for certain deductions and credits, such as the American Opportunity Tax Credit for education expenses or the Lifetime Learning Credit for tuition and fees.
Pro tip: If you’re self-employed or do odd jobs, keep track of your income and expenses in a separate bank account to make reporting easier. If you work a gig job, you will likely be classified as a 1099 independent contractor and need to report your income on a Schedule C form.
Renting Out Your Place
Looking to earn some extra money this summer? Renting out your place through apps like Airbnb or VRBO can be a great way to make some cash. Just keep in mind that rental income is taxable, and you will need to report it on your tax return. You may also be able to deduct certain rental expenses, such as home repairs, property taxes, and cleaning services. Make sure to keep detailed records and consult with a tax professional to maximize your deductions.
Pro tip: If you rent out your primary residence for less than 15 days in a year, you do not need to report the income. This rule, known as the “Masters Rule,” applies to major events such as the Super Bowl occurring in your area.
Making Home Improvements
Summer is a popular time to tackle home improvement projects, whether adding a pool, renovating the kitchen, or building a deck. While these upgrades can add value to your property and make for a more enjoyable summer, they may also qualify for tax deductions. Energy-efficient home improvements like installing solar panels or upgrading to energy-efficient windows qualify for the Residential Energy Efficient Property Credit. Keep documentation of your home improvement expenses and check with a professional to see if you qualify for deductions.
Pro tip: Keep track of your home improvement expenses and keep copies of all receipts, contracts, and warranties. This will make it easier to calculate your potential deductions when tax season rolls around.
Plan Your Summer Tax Strategy
It’s good to remember that these are just a few examples of summertime activities that could impact your tax return. To make sure you’re getting the most out of your tax benefits, here are some simple tips and reminders:
- Document Everything: Keep thorough records of any expenses related to these activities, including receipts, invoices, and contracts. Good record-keeping can help support your tax claims and deductions.
- Consult with a CPA: Seeking professional guidance from a certified public accountant can provide valuable insights into the tax implications of your summer activities. A CPA can help you navigate the complexities of the tax code and identify opportunities to minimize your tax liability.
- Stay Informed: Tax laws and regulations are always changing, so it’s crucial to stay informed about any updates that might impact your tax situation. Watch the news and reach out to a tax professional if you have any questions or concerns.
Turn to SME CPAs for Expert Tax Guidance
Planning ahead and seeking expert advice can make a significant difference in managing your tax responsibilities. At SME CPAs, our experienced tax professionals provide reliable guidance through all aspects of financial management, including tax planning.
Being proactive all year long allows you to set yourself up for a smoother tax season and find tax-saving opportunities. Let SME CPAs guide you through your unique tax situation and boost your financial health. Contact us today to explore how we can support your tax planning needs. We’re here to help you every step of the way.