- 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

What is Inflation?

Why do prices go up?

View Course »

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

TurboTax Articles

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Video: How to Claim the Affordable Care Act Premium Tax Credit (Obamacare)

The Affordable Care Act Premium Tax Credit is a new refundable tax credit that can lower your monthly health insurance premiums. If you qualify for the tax credit, you can claim the Premium Tax Credit throughout the year to lower your monthly health insurance premiums, or claim the credit with your tax return to either lower your overall tax bill or increase your tax refund.

Deducting Summer Camps and Daycare with the Child and Dependent Care Credit

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

What Is Schedule H: Household Employment Taxes

If you hire people to do work around your house on a regular basis, they might be considered household employees. Being an employer comes with some responsibilities for paying and reporting employment taxes, which includes filing a Schedule H with your federal tax return. But even if you have household employees, filing Schedule H is required only if the total wages you pay them is more than certain threshold amounts specified by federal tax law.

Add a Comment

*0 / 3000 Character Maximum