Summer estates, school preparation and tax planning tips

The summer months can lead to tax savings with these four tips.

Tax planning is a year round endeavor. Taking the time to actively reduce tax obligations can translate into big savings, leading to more money in your pocket. There are a number of opportunities to make the most of your money by taking advantage of various credits and deductions available from the Internal Revenue Service (IRS). A recent article in Accounting Today, a publication that focuses on information for tax preparers and auditors, discussed some tax tips that apply to many common summer activities.

Four of the more valuable tips include:

  • Rentals. If a summer estate is used as a rental, rental income may need to be reported on tax returns, but not always. For property owners who use the property primarily as a residence and not as an income property, the income may not need to be reported. This is generally true for those who rent the property for less than 15 days per year.
  • Gambling. For those who enjoy betting on horses or playing cards on vacation, additional tax reportings may be required. This is true if these games lead to winnings, and applies to both cash and non-cash awards. If the prize is a trip, automobile or spa service, the fair market value of the non-cash prize may need to be reported.
  • Education. Learning opportunities can also lead to savings. Those attending higher level education may be eligible for tax credits. The American Opportunity Tax Credit can result in an annual deduction of $2,500 and the Lifetime Learning Credit can translate to a tax credit of $2,000. In some cases, even day camps for young children can qualify. This type of excursion may fall into the Child and Dependent Care Credit federal tax credit, which works to lower the tax payer's taxable income.
  • Moving. Deductions can also be available for certain moving expenses. If the move is connected to a change in employment, transportation and lodging expenses may be deductable. The cost of shipping personal property may also qualify for a deduction.

These are just a few of the credits and deductions that may be available based on summertime activities. Qualifying for these deductions and credits generally requires completion of forms from the Internal Revenue Service and may require additional documentation. As a result, it is wise to contact an experienced tax planning attorney. This legal professional will review your options and help to better ensure a tax plan that meets your needs.