Top Ten Ways to Save on Taxes This Summer

Top Ten Ways to Save on Taxes This Summer

By A New England Nanny 29 0

top ten ways to save on taxesAfter a brutal winter in many parts of the country, summer is finally here. While you’re enjoying the warmer weather, it’s still important to remain diligent about business and personal tax planning, especially if you are a household employer. Nannies, housekeepers, and senior care providers, among other employees, cost money. Luckily there are some great ways to offset those expenses by cutting taxes during the next few months.

Here are our top ten ways to save on taxes this summer:

1. Entertain Top Business Clients

You may be eligible to write off 50% of the cost of business meals and entertainment if you entertain clients before or after a substantial business discussion. For instance, after you hammer out a business deal, you might treat a client to a round of golf and then dinner and drinks at a restaurant. The 50% limit applies to all the qualified expenses, including the amounts you pay for the client, yourself and your significant others.

2. Donate Household Items to Charity

Are you planning to clean out the garage, attic or basement this summer? If so, you’ll probably find household goods — such as used clothing and furniture — that you don’t want or need anymore. Consider donating these items to charity. Assuming they’re still in good condition, you may take a charitable deduction on your 2015 personal tax return based on the current fair market value of any donated items. Use an online guide or consult your tax professional for valuations.

3. Send the Kids to Camp

Parents who need to work may decide to send young children to summer camp while school is out. Assuming certain requirements are met, the cost of camp may qualify for a dependent care credit. Generally, the maximum credit is $600 for one child and $1,200 for two or more kids. But this tax break is available only for the cost of a day camp, including specialty camps for athletics or the arts. Overnight camp doesn’t qualify.

4. Buy an RV or Boat

Suppose you take out a loan to buy your recreational vehicle (RV) or boat. Surprisingly, the vehicle or vessel may qualify as a “second home” for federal income tax purposes. In other words, you may be eligible to write off the interest on the loan as mortgage interest on your personal tax return. The IRS says that any dwelling place qualifies as a second home if it has sleeping space, a kitchen and toilet facilities. Therefore, the interest paid to buy an RV or boat that meets these requirements is tax-deductible under the mortgage interest rules. This applies to interest paid on acquisition debt of up to $1 million and home equity debt of up to $100,000.

5. Minimize Vacation Home Use

Federal tax law allows you to deduct expenses related to renting out a vacation home to offset the rental income you receive. With summer already underway, you’ve probably worked out a rental schedule for your vacation home, but remember that you can’t deduct a loss if your personal use of the home exceeds the greater of 14 days or 10% of the time the home is rented out. Watch your personal use to ensure you remain below the 14-day or 10% limit.

6. Rent Out Your Primary Residence

Do you live in an area where a summertime event — such as the U.S. Open golf tournament, the Hampton Classic horse show or the San Francisco Marathon — will be held? If you rent out your home for no more than two weeks, you don’t have to comply with the usual tax rules. In other words, you aren’t taxed on the rental income — it’s completely tax-free — but you can’t deduct rental-based expenses either.

7. Harvest Investment Gains or Losses

Summer is a convenient time to survey your investment portfolio. If you’ve already incurred capital losses from securities transactions this year, any gains you realize between now and the end of the year may be absorbed by those losses. Conversely, if you incurred capital gains from securities transaction earlier this year, the losses you harvest in the second half of the year can offset those gains plus up to $3,000 of ordinary income in 2015.

8. Generate an Energy Credit

If you replace or upgrade your air conditioning system this summer, you may qualify for a residential energy credit. The credit is equal to 30% of the cost of energy-saving devices, including air conditioners, air circulating fans, doors and skylights. Specific credit limits apply to certain items. For example, there’s a $50 limit for air circulating fans. And there’s an overall lifetime energy credit limit of $500.

9. Take Advantage of Business Travel

Suppose you’re required to go on a business trip this summer. You can write off your travel expenses as long as the trip’s primary purpose is business-related — even if you indulge in some vacationing. For instance, if you spend the business week in meetings and the weekend sightseeing, the entire cost of your airfare plus business-related meals, lodging and local transportation is deductible within the usual tax law limits. Just don’t deduct any personal expenses you incur on your side-trip.

10. Support a Recent Graduate

If your child just graduated from college, this is probably the last year you can claim a dependency exemption for him or her. However, you must provide more than half of the child’s annual support to qualify for the $4,000 exemption. To clear the half-support threshold, consider giving the graduate a generous graduation gift, such as a car to be used on the first job. Unfortunately, dependency exemptions may be reduced for high-income taxpayers.

 

 ©2015 Thompson Reuters

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