Summer Tax Breaks and Summertime Tax Tips
Summer is here and taxes may be the last thing on your mind, but giving tax breaks a little bit of thought now could save you a lot of money when tax season comes around again. Read on for summertime tax tips that might help you save money at tax time.
What Do I Need To Know About Summer Jobs and Taxes?
Be sure to fill out a new Form W-4 for each job when you are hired. Not only will this form let your employer know how much income tax to withhold from your paycheck, it ultimately will determine whether you will get a refund, owe taxes, or be tax balanced (not get a refund nor owe taxes) when you file your tax return next April. Use the free W4 Tax Withholding Assessment Tool to help you determine your tax withholding situation!
How Do I Complete My W-4 If I'm a Dependent?
You may want to claim "exempt" on your W-4(s). Be aware that your employer will still withhold Social Security and Medicare taxes, but not income taxes.
Do I Need to File a Tax Return As A Dependent?
If you are claimed by someone else as a dependent and you earn a total income of $6,350 or less during the year, you generally will not owe taxes or be required to file a tax return (though you may want to file a return to claim tax credits or a refund).
What Other Summer Job Tax Tips Should I Know?
No matter what job you do this summer, here are more tax tips:
- Determine If You Are a Wage or Self-Employed Worker: If you are hired at an ice cream shop and your employer gives you a Form W-2 that reports your income, you are a wage worker (AKA employee). However, if you babysit, mow lawns, and/or do other other odd jobs and your employer gives you a 1099-MISC, you are generally considered a self-employed independent contractor. If your net income (income minus expenses) from self employment is $400 or more, the IRS requires you to pay self-employment taxes. This means that you pay Social Security and Medicare taxes since they are not withheld from your paycheck. Find out if you are an employee or self-employed taxpayer.
- Report Cash Tips As Income on Your Tax Return: There are jobs, such as waiter or camp counselor, where you may receive cash tips. Tips are considered part of your taxable income, and the IRS requires you to report them on your tax return if the tips from any one job total $20 or more.
- You May Not Be Self-Employed If You Are a Newspaper Carrier or Delivery Person: Many newspaper carriers and delivery people are under age 18, so they are usually not subject to self-employment taxes (unless they are classified as "direct sellers").
- Report Active Duty Pay As Taxable Income: If you are in the Reserve Officers' Training Corps (ROTC) and you attend summer advanced camp, you may receive active duty pay. While your normal subsistence allowance is tax-free, active duty pay is taxable income.
- You May Not Need to Pay Taxes If You Work For Your Parents: If you are younger than 18 and you work for your parents, you can earn up to the amount of the standard deduction and owe no federal income tax.
- File a Tax Return If You Are Expecting a Refund: Even if you do not make enough money from your summer job to file a tax return, you may still want to file a return. If your employer withheld too much tax from your paycheck, you will need to file a return in order to receive a tax refund. Though there is no penalty for filing a late tax return if you are expecting a refund, you must file the return within three years after the original tax return deadline. After three years, the U.S. Treasury will keep the money.
Should I Add Tax Planning to My Summer Wedding Checklist?
Yes, you should since getting married greatly affects your tax situation. Though taxes may be the last thing on your mind, being prepared tax-wise when you tie the knot can easily help you file your 2018 Tax Return in 2019. Here are some things to keep in mind:
- Change Your Tax Return Filing Status: If your get married on or before December 31, 2018, you're considered be married for the entire year for tax purposes. You must file as Married Filing Jointly or Married Filing Separately.
- Update Your Paycheck Tax Withholding: You and your new spouse will need to update your paycheck tax withholding by increasing your decreasing your allowances on Form W-4. Your goal is to make sure your W-4 information matches the amount of tax that's withheld from your pay, so you neither receive a large tax refund or owe tax when you file your tax return next year.
- Update Your Name and Address Changes with the IRS: Make sure you inform the Social Security Administration of your name change after getting married (the Administration will send the information to the IRS) and the IRS on your address change if you moved to a new address with your spouse. That way, there would be no delays on processing your filed tax return.
- Contact the Marketplace with Changes in Circumstances to Receive the Premium Tax Credit: If you and/or your new spouse purchased health insurance from the Marketplace, make sure the Marketplace knows about your new married status. That way, the Marketplace can update your Premium Tax Credit amount (and you won't be surprised by a smaller refund or a higher taxes owed amount when you file your return).
- Use the Right 1040 Form for Your Married Tax Situation: For example, if you are claiming itemized deductions, you can only use Form 1040. However, you don't have to figure out which 1040 form to use when you prepare your tax return on efile.com, Start with Form 1040-EZ, 1040-A, or 1040 and we will select the correct tax form for you based on your answers during a short tax interview.
Learn more about how getting married affects your tax return.
Can I Deduct Summer Camp Expenses?
Do you have kids that go to summer camp? If you have to pay someone to care for your children so you can work or look for work, you can get a tax break for the expenses. It doesn't matter whether you send your kids to day care or to day camp this summer (overnight camps don't qualify)--you can count the costs toward the Dependent and Child Care Credit.
Keep in mind that you must be working or actively seeking employment in order to qualify for the Child Care Credit. If you are married, both you and your spouse must be working or looking for work. And the job-seeking must pay off at some point during the year, because both spouses must have earned income in order to claim the credit. Sorry, but stay-at-home moms or dads do not qualify.
Do I Have to Think About Taxes When I Have a Yard Sale?
If you are having a garage sale or yard sale this summer, you may wonder if you need to worry about taxes. These types of sales are generally tax-free, because your used items are sold for much less than for what you bought them, making the "cost of goods sold" much higher than the selling price.
If, on the other hand, you sell items which you have marked up in value at a flea market, farmer's market, or craft fair, you will probably need to report your profits and losses, pay self-employment tax, and collect sales tax.
Can I Donate My Unsold Items and Claim a Tax Deduction?
If you have unsold items that are in good condition, you can donate them to charity and deduct their fair market value. Since you need to itemize the deductions, make sure that you keep receipts or other documents as proof of your donations in case the IRS sends you an audit notice,
Edutain yourself with Fun Summer Tax Facts
Tax Planning and TaxStimate
Can I Deduct the Mileage for Driving a Vehicle for Charitable Purposes?
Though you cannot donate your time towards a charitable cause, you can claim an itemized deduction for driving a personal vehicle and donating services on your trip. You can deduct 14 cent per mile driven in Tax Year 2018. Keep all mileage records in case the IRS asks for them after reviewing your accepted tax return.
Can I Get a Tax Break for Employing My Children?
Do you own a business? If you have children under the age of 18, you can hire them to work for you and then deduct the wages you pay them from your own taxable income. Furthermore, if you operate a sole proprietorship, you can employ your children without having to pay any Social Security or Medicare taxes on their wages. But make sure you pay them an amount that is reasonable and based on the work they are performing (in order to avoid an IRS tax audit).
Is My Summer Rental Income Tax-Free?
Do you have a summer home or vacation property (house, condominium, apartment, boat, mobile home, or similar property)? You can rent it out for up to 15 days a year without paying taxes on the rental income, and you can deduct the qualified expenses for the rental home on Schedule A of your tax return. If you paid mortgage interest on your second home, don't forget to deduct the mortgage interest.
Do I Need to Report My Gambling Winnings on My Tax Return?
If you visit a casino during your summer vacation, you will need to report any gambling winnings on your tax return. You can deduct your gambling losses if you itemize deductions, but only if you have winnings that are equal to or greater than the amount of your losses.
Can I Claim a Tax Credit for Installing an Energy-Efficient Source in My House?
Summers can get exceptionally hot in many parts of the country, so you may use a lot of extra energy to keep cool. In 2018, when you install certain renewable energy sources in your home, you can get a tax credit worth up to 30% of the total cost, as well as save money on utility bills. This credit is not restricted to your primary residence (except for fuel cells), and it may be claimed for newly constructed homes. There is no cap or upper limit on the credit (except for wind turbines and fuel cells), however, you must own the home (rentals do not count). Learn about the Residential Energy-Efficient Property Credit.
Can I Claim Storm Damage on My Tax Return?
Unfortunately, many people have suffered property damage this summer due to storms, tornadoes, wildfires, and other natural disasters. If this happened to you, you can deduct the reduction in value of your damaged property as a casualty loss on your 2018 tax return if your home county has been declared a federal disaster area. You may get additional tax breaks, such as extended deadlines, or the right to file immediately to claim your casualty loss benefits.
Do I Need to Keep Copies of My Tax Records?
Now is a good time to make sure your personal tax records are up-to-date. Preparing and efiling your tax return on efile.com is a great way to maintain your records in digital format. We also recommend that you print your tax return each year and keep a hard copy for your records.
If you prepared and efiled your return on efile.com, sign into your efile.com account here to print your tax return.
If you do not yet have an account with efile.com, you can create a free account here.
If you did not efile with efile.com, you can find out how to order a free transcript of your tax return from the IRS here.
What If I Filed or e-filed a Tax Extension for My 2017 Tax Return?
If you get an IRS extension for your 2017 tax return by April 18, 2018, you have until October 15, 2018 to file or efile your 2017 Tax Return. However, if you have all of your information ready, why wait? Create an efile.com account or sign into your existing account to complete and efile your 2017 tax return.
What If I'm Waiting to File Because I Don't Have the Money to Pay My Taxes?
You might want to know that not filing is more expensive than not paying. Find out about the penalties for not filing a tax return and for not paying.
Is It Too Soon to Start Preparing for Next Tax Season?
Though Tax Day is not until next April, it's not too early to think about how to tax plan! Review our list of stupid and smart things to do when filing taxes to help you decide what to do (and not do) when completing your 2018 Tax Return!
Are There Other Ways to Save Money Every Day?
There are simple things you can do all year round to save money on taxes and other expenses. Check out some practical money-saving tips and ways to save on everyday expenses and bills.