Beaches, barbecues and taxes? Yeah right. We’d be kidding ourselves to think taxes are anywhere on your radar right now. But they need to be. Some of your summer activities may qualify for special tax breaks. While others can cause unexpected hurdles at tax time if you’re not prepared. Keep reading to see how your summer plans may affect your taxes next year.
Moving to a new area
With the kids being out of school, many parents view summer as the perfect time to uproot their family. Whether you’re moving across town or across the country, you may be able to deduct the expenses on your tax return. This includes the cost of packing and shipping your belongings, transportation for you and your family and renting a storage unit, if necessary. However, you must comply with three simple rules.
- Your move must be related to the start of a new job or a transfer to a new location.
- Your new job must be at least 50 miles farther from your old home than your old job was.
- You must be a full-time employee for at least 39 weeks during the first 12 months of your move.
Check all the boxes above and you’ll be able to deduct your moving expenses on your tax return.
Marrying the love of your life
It’s wedding season! Priceonomics reports that 80 percent of couples say their nuptials between May and October. For those who’ll be saying “I do” this year, we have some advice for you. All name changes must be reported to the Social Security Administration (SSA). If you use your new name on your tax return without giving the SSA a heads up, your tax return will be rejected. Updating your information is as simple as completing an Application for a Social Security Card and mailing it in. However, it can take a few weeks for your application to be processed so do it before the tax season begins. You don’t want anything standing in the way of you and your refund.
Renting out your home
Thanks to sites like Airbnb, it’s no longer taboo to rent your space to travelers looking to live like the locals. In most cases, it’s a win-win situation. They get a great place to stay and you get to earn some extra cash. The best part is if you play your cards right, your earnings may be tax-free. The rules are simple. You cannot rent out your home for more than 14 days a year. Additionally, you must use the property yourself more than 14 days a year or at least 10% of the time you rent it out. Follow those guidelines and you’ll walk away scot-free. Go over the limit and you’ll be required to report the income and pay taxes to Uncle Sam. Regardless of what you plan to do, it’s imperative that you keep good records just in case the IRS comes knocking.
Surviving the hurricane season
Even though the Atlantic hurricane season began June 1st, late August is usually the prime time for them to strike. If your property is damaged due to a hurricane, tornado or some other unexpected event, you may be able to claim casualty losses on your taxes. However, it’s not as simple as tallying up your receipts and deducting it on your return. First, you must determine your property’s adjusted basis and it’s fair market value. Next, deduct any insurance reimbursements you receive from the smaller of the two amounts. Then subtract $100 for every casualty event you experienced this year. In the final step, you must reduce your losses by 10 percent of your adjusted gross income. Anything leftover is what you can claim on your return.
Being a procrastinator
Requested a tax filing extension? Well, there’s no time like the present to finally get your taxes done. If you owe the IRS, you’ve been racking up interest and penalties since April 19th. The penalty for paying your taxes late is 0.5 percent of your unpaid balance. Meanwhile, the interest rate is 3% plus the federal short-rate which currently stands at 1.18%. That gives you a total interest rate of 4.18%. So although the extended deadline is October 16th, you’ll save a lot more money by filing them as soon as possible. When you’re ready to file, give ezTaxReturn a try. They make taxes so easy, your return can be ready for e-file in as little as 30 minutes.