Taxes are probably not what comes to mind when thinking about Summer, but you may be surprised at some of the ways you can reduce your 2022 income taxes. Consider these summertime strategies:
1.) Tax-free rental income
If you rent your residence or vacation home for 14 days or less in the year, that rental income is not taxable. This could be meaningful tax-free income.
2.) Mortgage interest deduction for boat or RV
The Internal Revenue Code allows you to claim a boat or RV as a 2nd residence if it has sleeping quarters, cooking facilities, and a bathroom. If your boat or RV meets these requirements and you itemize deductions, you could claim the mortgage interest and property taxes as deductions. (subject to mortgage interest limitations).
3.) Combine business with pleasure
Add vacation days to a summer business trip, and bring your family along. You can deduct most of your own (but not your family’s) unreimbursed costs, such as airfare and your share of meals and lodging during the business portion of your trip.
4.) Put your kids to work
If you own a business, give your children a summer job. You can deduct their wages, and if you’re a sole proprietor, you needn’t withhold social security or Medicare taxes as long as your kids are under 18. They can even use their earnings to set up an IRA.
5.) Take a credit for summer day care
If you have one or more children under age 13, your costs of in-home childcare, a day care facility, or sending the kids to day camp may qualify for the Child and Dependent Care Tax Credit. The costs must be incurred to enable you (and your spouse, if you file jointly) to work or look for work and you generally must report some earned income. Payments to your spouse, your dependent, or your child who is under age 19 at the end of the year aren’t eligible. Overnight camps and summer school tutoring won’t qualify either.
The credit can equal up to 35% of qualifying expenses, depending on your income. Total expenses are limited to $3,000 for one child and $6,000 for two or more.
6.) Clean out your garage and take a deduction
Donate your excess property to a qualifying charity and deduct the fair market value. Be sure to get a receipt and check the documentation rules for high-value items.
Contact us for more summer tax-cutting ideas. We’re here to help!