Summertime Tax Tips
By summertime, the tax deadline is long gone and you may think you don’t have to worry about taxes until next year. However, many summertime activities, from getting married to working a summer job, can affect your tax situation. Make sure to check out these Summertime Tax Tips to avoid surprises next tax season:
Getting married
It’s wedding season! If you’re getting married this summer, make sure to add tax planning to your to-do list. To ensure a smooth tax season next year, here are the areas you should look over:
Name change: Report name changes to the Social Security Administration
Address change: Report address changes to the United States Postal Service and employers
Tax withholding: Review Form W-4, Employee’s Withholding Certificate, to determine if you need to make any changes
Filing status: Determine if you will file as married filing jointly or married filing separately. Typically, it is most beneficial to file jointly, but in unique situations, filing separately may be more beneficial. If you have questions about this, consult with a tax professional.
Tax bracket: Filing jointly may move you into a different tax bracket.
For more information, check out our blog post on how getting married affects your taxes.
Sending kids to a day camp or daycare
While the kids are on summer break, you might need some extra help watching over them while you work. Costs for a day camp (overnight camps are not eligible), daycare, nannies, or other caregivers can be counted towards the Child and Dependent Care Tax Credit.
This credit is only applicable if your child is under the age of 13 and you (and your spouse, if filing a joint return) are working or actively looking for a job.
Working part-time
If you are taking on a part-time or temporary summer job, you will need to consider how this will affect your tax situation. First, you need to determine if the position is classified as an employee or a self-employed worker. If you're an employee, then you will need to fill out a Form W-4 to withhold taxes from your paycheck.
Self-employed and gig economy workers need to consider how much tax to withhold and determine how to pay the tax. You can either do this by withholding more tax from another job you have or by making estimated tax payments. Some jobs where you may be considered self-employed include babysitting, yard work, ride-sharing or delivery services, and other odd jobs.
Going on a business trip
Summer is a popular time to travel, whether it’s for business or pleasure. A business travel deduction is available for employees who need to travel for business reasons. Ordinary and necessary expenses like tickets for transportation, lodging, non-entertainment-related meals, dry cleaning, and other business-related costs can be deducted on your tax return.
If you choose to mix business and pleasure by staying a few extra days past your business trip or bringing your family along for a vacation, you can still deduct the business-related expenses accrued during the trip — just make sure to draw a clear line between business and personal expenses.
There are quite a few nuances in deducting business travel expenses, so we recommend you refer to IRS Publication 463, Travel, Gift, and Car Expenses, for more information.
Summer cleaning
Decluttering your space can help you clear your mind and also provide you with a tax benefit. Items that you donate in good condition may qualify you for a charitable contribution. To claim this deduction, you will need to itemize on your tax return, donate to a qualified charity, and have proof of all donations. Make sure to keep good records and provide them to your tax preparer. These records should be kept with your tax return after you file in case of an audit.
Found some items you want to sell? Generally, you don’t need to worry about taxes for secondhand items since there typically isn’t a profit on these items. However, if you have an antique or vintage piece that sells for more than you bought it for, you may need to report this income on your tax return and pay taxes on it.
Buying or Selling a home
If you’re a first-time homeowner, it’s important to stay educated on how owning a home affects your tax situation. Publication 530, Tax Information for Homeowner, is a great resource for expenses you can deduct and records you should keep. Common deductions include mortgage interest, mortgage insurance, and mortgage points. These deductions only apply if you itemize on your tax return. You will need to itemize and file Schedule A with your tax return to deduct home expenses.
When you sell a home, your capital gains may be tax-free up to $250,000 if you’re single and up to $500,000 if you are married filing jointly. You will need to file a Schedule D with your tax return to report capital gains and losses.
Volunteering
Volunteering can be a great way to spend the free time you might have in the summer. While you can’t deduct anything for the time you volunteer, you can deduct mileage driven in a personal vehicle for volunteer purposes. For 2022 and 2023, the charitable mileage rate is 14 cents per mile.
Meet with a tax professional
Summertime can bring lots of tax benefits for taxpayers and their families, but it may also bring lots of questions. If you would like to meet with a tax professional to see how your summertime may affect your tax situation, we provide tax planning services to help you plan for next tax season and beyond. Give us a call at (360) 922-0235 to learn more.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or view the resources below to see how this information may apply to you.
