5 Summertime Tax Breaks

The temperature is up and many people take vacations during the summer. Taxes may be the last thing on your mind. Nonetheless, here are 5 tax breaks you may want to consider this summer.

1.      Send your child to day camp cost

If you send your child who is under age 13 to day camp so you can work, the costs are eligible expenses for purposes of the child and dependent care credit. However, the costs of sleepaway camp are not treated the same; they don’t count even though the child’s attendance there enables you to work.

2.      Optimizing a vacation home

If you own a home near the beach or other resort area and rent it out for no more than 14 days in the year, all of the rent you receive is tax free. There is no dollar limit on this tax break. You don’t even need to report the income on your return. However, you can’t deduct rental expenses, such as advertising; you can continue to deduct your usual homeowner costs (e.g., mortgage interest) if you itemize deductions.

Or you might consider buying a boat or RV. Remember, mortgage interest is deductible on your main home and a designated second residence up to set limits on qualifying debt. A boat or RV is treated as a residence for purposes of the mortgage interest deduction rules provided it has sleeping, cooking, and toilet facilities.

3.      Business trips

You may be able to combine business with pleasure this summer and write off the cost of this travel. If, for example, you fly on a trip within the U.S. primarily for business but spend a few days sightseeing or visiting with family, then all of the airfare is a deductible expense for the business.  However, the business can’t deduct lodging or meals for your personal days.

4.      Add a swimming pool or air conditioning

If you have a medical condition that requires you to put in a swimming pool or add air conditioning to your home, and you itemize deductions, you may be able to claim a medical expense deduction. The cost of a permanent improvement prescribed by a physician because of a medical condition is deductible to the extent it does not add value to the home. In other words, the cost of the improvement reduced by any increase in the value of the home is the deductible medical expense.

5.      Do good for others

Combining travel with some altruistic activity may entitle you to a charitable contribution deduction for your out-of-pocket costs. For example, if you drive your vehicle, you can deduct your actual expenses or 14 cents per mile. The IRS cautions that a deduction is allowed only if there is no significant element of personal pleasure, recreation, or vacation for the travel, but you can take the write off even if you enjoy the trip. The IRS gives these examples:

• You are a troop leader for a youth group and go camping. Your unreimbursed costs are deductible, even though you enjoy this activity.
• You work several hours each morning on an archeological dig sponsored by a charitable organization and spend the rest of the day sightseeing. Your unreimbursed costs aren’t deductible, even if you work really hard at the dig.

Conclusion

Enjoying the summer doesn’t preclude taking advantage of tax breaks. You’ll be happy, and remember fondly this summer, when your file your tax return for the year.