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6/04/2014

Summer Time Tax Tips

The days are warm, the pools are open, and the beaches are glistening in the sun - it's Summer! The team at ExpressExtension.com realizes taxes may be the furthest thing from your mind, but there are a lot of summer activities that can affect your tax return. Let's go over some summer tax tips together and get your well prepared for tax season...

Summer Camp
Are your kids going to have a great summer because you are sending them to camp? You can qualify for a tax break of expenses used to pay someone to care for your children. Day care or Day camp expenses (overnight camps don't qualify) can be counted toward a Dependent and Child Care Credit.

You do need to meet a few requirements to qualify for this credit, including: you must be working or actively seeking employment, if married - both persons must be working or looking for work.

Summer Jobs
If you are earning a little extra income with a summer job, be sure to fill out a new Form W-4 for each job when hired. A W-4 will inform your employer on how much income tax to withhold from your paycheck. Here are some job-specific tips:
  • Babysitting, mowing lawns, and other odd jobs are considered as self-employment. The IRS requires you to pay self-employment taxes if your net income (income minus expenses) is $400 or more.
  • Any position where you would receive cash tips, your tips are considered part of your taxable income. The IRS requires you to report them if the tips from any one job are $20 or more.
  • Newspaper carriers and delivery people that are under the age of 18 are generally not subject to self-employment taxes, unless they are classified as "direct seller". 
  • Members of ROTC that attend summer advance camp, can receive active duty pay. You will need to note that your normal subsistence allowance is tax-free, active duty pay is taxable income.
  • If you are under the age of 18 and work for your parents, you can earn up to the amount of the standard deduction and owe no federal income tax. 
Tax Break for Employing Your Children
Did you know if you own a business and have children under the age of 18, you can hire them and deduct the wages you pay them from your own taxable income? And wait there's more, if you operate a sole proprietorship, you can employ your children without having to pay any Social Security or Medicare taxes on their wages. You will need to pay them an amount that is reasonable and based on the work they are performing. 

Summer Rental Income
You can rent out your summer home/vacation property for up to 15 days a year without paying taxes on the rental income. 

Enjoy the summer weather and contact your Tax Professional for more information on how your summer activities will affect your taxes. 


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