6 summer tax tips
Monday, June 20, 2016
Summer officially arrives today. For most of us, that means a more relaxed schedule and time for some much needed fun.
But don't forget about taxes for these next few months. There are some summer situations that lend themselves to particular tax consideration.
Here are six.
1. Deal with the heat.
Summer is hot. We know that. Folks in Arizona especially know that. The early season heat wave in the Grand Canyon State already has taken a tragic turn. So be careful, people.
And if your home can't take the heat, there are things you can do. Replace your drafty windows. Install a full house fan to help with air circulation. Get a new air conditioner. Uncle Sam can help here.
The tax credit for specific energy efficient home improvements was included in the tax extenders package. It reinstated the tax break, officially known as the Nonbusiness Energy Property Credit, through the 2016 tax year. If your house is just too dang hot, check it out before thermometers climb any higher.
2. Send the kids to camp.
Schools out for the summer. I've already heard parents complaining about having to deal with antsy kiddos. Send them to camp.
And if it's a day camp, where you drop the youngsters off in the morning and pick them up in the afternoon, it's a twofer.
The kids are taken care of while you're at work and you can use the camp costs to claim the child and dependent care tax credit. Two things to note here. First, the youngsters' supervision is needed so you can go to your job and second, only day camps, not overnight camps, count.
3. Get in shape.
Summer's lightweight and noticeably scantier clothing makes all of us who have body issues a little uncomfortable. We know we should have been cutting calories months ago to get beach ready, but that realization really hits home when we put on a swimsuit for the first time.
And if your doctor says you need to drop the pounds for health, not just cosmetic, reasons, you might be able to claim the costs of a weight loss program as a deductible medical expense.
Once you get the weight loss order from your doctor, you can count membership fees in a weight-loss group such as Jenny Craig and Weight Watchers, as well as the costs for the groups' separate meetings. If your weight issue is extreme and your doctor prescribes bariatric surgery, like what New Jersey Gov. Chris Christie underwent, that cost also counts as a medical deduction claim on Schedule A.
4. Put in a pool.
It's hot and those five -- OK, 10 -- extra pounds be damned. You're hitting the pool. But it's crowded. And you have to drive there. And no matter how many towels you put down, your car seat always get soaked on the way home.
Maybe it's time for a backyard swimming pool. And under certain conditions, it could provide a tax break.
Don't call the pool contractor yet. If you'll use your pool primarily for your and your family's enjoyment, construction costs are not tax deductible.
But in certain situations, a pool may count as a medical deduction. As with the weight loss tax claim, the key factor for deducting a personal pool (or spa or hot tub) is that it provides a qualified medical treatment that is prescribed by a physician. The pool (or spa or hot tub) also must be used primarily for the prescribed medical treatment.
5. Rent out your home(s).
If you have a lake house or mountain cabin, they are perfect get-aways. But they don't have to be limited to just your personal enjoyment.
You can rent out your vacation home and, if you follow the tax rules, not owe any tax on the rental income. Heck, even renting your primary residence for a brief period -- a common occurrence when special events, like South by Southwest music festival or the Formula 1 race here in Austin -- can produce tax-free income.
Just make sure that you don't have tenants for more than two weeks in a tax year.
6. Be prepared for trouble.
The only constant in life is change and sometimes those changes are disastrous. We can't stop them, but we can be prepared, especially for the added challenges that come with warmer weather.
Wildfires are raging in the west. Danielle, the fourth tropical system of the 2016 Atlantic/Gulf of Mexico hurricane season, officially formed today.
The key to surviving, literally, such natural disasters is being ready. And if you do sustain losses from a disaster, make sure you know and take advantage of the tax rules that apply in special catastrophic situations.
You can find more in the ol' blog's special Storm Warnings page. It's a comprehensive collection of blog posts about disasters and the associated tax implications. I hope you don't need the info, this summer or any time, but, as I said, it never hurts to be prepared.
OK, enough tax talk. It's finally, officially summer! Get out there and enjoy!
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