With summer approaching, taxes may be the farthest thing from your mind. However, there could be some savings in what you do this summer. Here are some points to help you make summertime plans.
If you rent out your home for no more than 14 days, all of the rent you receive is tax free. You don’t have to report this income on your return.
Of course, you can’t deduct depreciation, maintenance, advertising, and other rental-related costs. You can, however, continue to deduct mortgage interest and real estate taxes for this rental period.
If you send your child to a day camp so that you can work full or part time, you may be eligible for a dependent care credit for the camp expenses. The credit is 20% to 35% of costs, depending on your adjusted gross income. Only eligible costs up to $3,000 for one child ($6,000 for two or more children) are taken into account. The credit applies for children up to the age of 13, as well as a dependent of any age who is physically or mentally incapable of self-care. If your child turns 13 this year, only expenses up to the child’s birthday count for the credit.
Note: The costs of sleep-away camp do not qualify for the dependent care credit, even though you pay the expenses so you can work.
If you own a business in which your child can perform services, put your child on the payroll. Your child will not only gain work experience but you and your child will reap tax benefits.
As long as the child is a full-time student under the age of 24, he or she remains your dependent, regardless of the child’s earnings.
Set vacation plans that include a combined business and pleasure trip. In the case of travel within the United States, as long as the primary purpose of the trip is for business, you’ll be able to deduct the full cost of airfare as well as other costs for the business-related portion of the trip.
For example, if you live on the East Coast and fly to the West Coast for business meetings Monday through Thursday and don’t fly home until Sunday, you can deduct all your airfare and accommodations for the business days as well as 50% of the cost of your meals on these days. If you bring a spouse or companion, you usually can’t deduct the second fare, but it won’t cost you extra for the additional person in the hotel room.
The cost of sightseeing and other personal expenses for the nonbusiness days are nondeductible.
An estimated 16,500 IRS auditors, agents, and other employees could be needed to collect the new taxes that will levied on taxpayers under the new health care law starting in 2014.View all factoids