- Days left

5 Summer Tax Breaks You Should Know About

×
Dollar sign on the beach
Getty Images
Summer is almost here, and many of us are thinking about vacation trips and other ways to enjoy the season. But with April 15 just two months behind us (or 10 months into the future) what most of us probably aren't thinking about is taxes. However, there are smart moves you can make now that will save you money next April.

1. Summer Camp Expenses Can Qualify for Tax Credits.

If you have kids and they go to summer camp, then you might be able to qualify for the Child Care Tax Credit. This credit offers between 20 percent and 35 percent of the cost of qualifying camps, up to $3,000 for a single child or $6,000 for two or more children.

In order for married couples to claim the credit, though, both spouses have to have earned income from work. In addition, the costs of overnight camps don't qualify for the credit, although day camps from which you pick up your kids each day do qualify. You'll want to talk to the group running the camp in order to get the documentation needed to claim the credit when you file your tax return next year.

2. Summer Jobs for Kids Often Qualify as Income-Tax Free.

Dependents don't get the same deductions that non-dependents get, but their standard deduction can rise when they have earned income. Specifically, the dependent standard deduction is generally $1,000, but it rises to $350 above the total amount of earned income that the dependent receives during the year, all the way up to the non-dependent single limit of $6,100. Earn up to that amount, and your child won't have to pay tax or file an income tax return.

One thing to keep in mind, though, is that common jobs like lawn care or babysitting are treated as self-employment. If you earn more than $400 during the year for that work, additional self-employment taxes are due even if you have no income tax liability.

3. Soak up the Sun for Solar Credits.

Basking in the sun might be your idea of the perfect way to do nothing, but if your house has solar panels, it can be hard at work saving you money on your electric bill. The IRS also does its part to make going solar more affordable, with a tax credit of 30 percent on what you pay to purchase qualifying solar energy systems. Other subsidies and tax breaks at the federal and state level can be available, so check locally to see what benefits you might qualify to receive.

4. Going on a Long Vacation? Rent Out Your Home Tax-Free.

If you own a vacation home that you rent out throughout the year, you'll pay taxes on your rental income. But the IRS has a special rule that says that if you rent out residential property -- whether it's your primary residence or a second vacation home -- for less than 15 days total, then you don't have to treat the money you receive as rental income. Once you hit the 15-day mark, though, the special exception goes away.

5. You Can Get Tax Breaks From Home Damage.

When the sun stops shining in summer, rough weather can be on the horizon: Depending on where you live, it may be the season for tornadoes, hurricanes, or flooding. The casualty-loss provisions of the tax code allow you to deduct losses above $100 to the extent that they exceed 10 percent of your adjusted gross income. Keep in mind that the amount of your loss is limited to whatever isn't covered by any insurance policy you might have on the property. Still, the tax break can at least cushion the blow of your deductible, or uninsured losses.

Be Tax-Smart This Summer!

Taxes might be the last thing on your mind right now, but keep these tips in mind and they could help you save on your tax bill next spring.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

Increase your money and finance knowledge from home

Goal Setting

Want to succeed? Then you need goals!

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum