Summer 2022 is coming to an end, and taxes may be the last thing on your mind. However, 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 summer tax tips that could help you save money on your taxes. This will help you plan for your taxes.
Summer 2022 is coming to an end, and taxes may be the last thing on your mind. However, 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 summer tax tips that could help you save money on your taxes. This will help you plan for your taxes.
Generally, under long-standing tax rules, you can deduct only 50% of the cost of qualified business meals. But the Consolidated Appropriations Act (CAA) carves out a special temporary exception. It lets restaurants deduct the full cost of food and drinks they serve in 2021 and 2022. This includes food for both eating in and taking out.
Use this one-of-a-kind tax break this summer. Keep in mind that the cost of tickets to a baseball game with clients is no longer deductible as business entertainment. However, you can write off 100% of the cost of food and drinks if they are invoiced separately.
Travel is on the rise again. Do you have any trips planned for this summer? If the main reason for your trip is business, you can write off your travel costs, even if you also take a vacation.
For example, if you fly across the country and spend the week at meetings and the weekend sight-seeing, you can deduct the full cost of your flight, as well as any business-related meals, lodging, and local transportation. But you can't write off any personal expenses. Also, if you take your family with you on a business trip, their costs are not tax-deductible. But you can write off what it would have cost you to travel by yourself.
For example, if a hotel room costs $250 per night and a single room costs $200 per night, you can deduct $200 per night.
Midyear is a good time to look at your investments. If you've already had capital losses from trading in securities, any gains you make between now and the end of the year may be absorbed by those losses.
On the other hand, if you made capital gains earlier in the year, the losses you "harvest" during the summer can cancel out those gains and up to $3,000 of ordinary income in 2022. Any extra loss is carried over indefinitely. If you'll have a net long-term gain in 2022, the highest tax rate most people will pay is 15 percent. Plus, if you're a high-income investor, you may have to pay a 3.8 percent Net Investment Income Tax (NIIT) on top of your regular capital gains tax.
However, people in the lowest tax brackets, like your children, may benefit from a 0% tax rate on long-term capital gain.
The 10 percent tax credit for installing energy-saving home improvements, like an ENERGY STAR certified water heater or central air conditioning system, technically ended in 2021. (Even though Congress could bring the credit back if they wanted to.)
But you might still be able to get a tax credit for using renewable energy resources. On the list of eligible costs are:
- Solar panels and solar-powered water heaters,
- Wind turbines,
- Geothermal heat pumps, and
- Fuel cells rely on a renewable resource (for example, hydrogen).
Under current law, this credit is being slowly phased out, and in 2022, it will be worth 26% of qualified expenses. In 2023, it will go down to 22%, and then it will end in 2024.
Young kids whose parents work full-time often go to summer camp when school is out. As long as certain requirements are met, the cost is eligible for a credit for caring for dependents. For 2022, taxpayers with moderate to high incomes can get a maximum credit of $600 for one child or $1,200 for two or more children.
This tax break is only for day camps, which can be sports camps or camps for the arts. A camp where you stay overnight doesn't qualify.
If you use some of your free time this summer to clean out the garage, attic, or basement, you'll probably find used clothes or furniture that you no longer need or want. Instead of throwing these things away, you could give them to charity. As long as they're still in good shape, you can get a charitable deduction based on their current fair market value.
But you can only get a tax break for giving to charity if you itemize. If you plan to take the standard deduction instead of itemizing in 2022, you will help the charity, but you won't get any personal tax breaks.
Do you live in an area that hosts events, like golf tournaments or music festivals? If so, you might want to move out while the event is going on and rent your home to people who are going. You don't have to follow the usual tax rules if you rent out your home for less than two weeks.
That means that you don't have to pay taxes on the rental income because it's not subject to federal income tax. But you also can't deduct costs related to renting. You could use the extra money to treat yourself to a vacation while the event is happening, or you could use it to make home improvements or repairs you've been putting off.
If you are shopping for an RV or boat for personal use, you should know that people who itemize can deduct annual state sales taxes paid during the year instead of their state and local income taxes.
Important: If you choose to deduct sales taxes based on the optional IRS table instead of keeping track of all your actual expenses, you can write off the sales tax for RVs, boats, and vehicles in addition to the table amount.
As an added bonus, an RV or boat can be a personal residence if it has a place to sleep, cooking and toilet facilities. In this case, you may also be able to deduct mortgage interest on the property, within the normal limits.
Your vacation home is a personal residence if any of the following are true:
- You rent it out less than 14 days a year,
- You use it more than the greater of 1) 14 days or 2) 10% of the days you rent it out at fair market rates.
Personal use usually means that the owner, certain members of the owner's family, or anyone else who pays less than fair market rental rates is using the property. When figuring out personal use, leave out days when the house is empty and days spent mostly on repairs and maintenance. So, if you clean up the house for a few days while the rest of the family is out enjoying the great outdoors, it won't count against you.
The tax law lets you use rental income from your vacation home to pay for the costs of renting it out. With summer coming up quickly, you may already have a plan for renting out your home. However, you can't claim a loss if you use the home for yourself more than 14 days or 10% of the time it's rented out. Make sure your personal use stays below these limits to avoid this trap.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
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