It’s amazing how your outlook on life can change so much as you get older. For example, I was a huge fan of the He-Man Masters of the Universe cartoon when I was a youngster. I mean HUGE fan. My life during preschool pretty much revolved around it. In my head, the show’s concept made complete sense. He raises a sword, says a few magic words, and presto—he changes from a little weenie to the strongest man in the universe. But now as I watch the same cartoon with my children I find myself as confused as a chameleon in a bag of skittles. My head is racing…“How does no one realize that He-Man is Prince Adam, including his parents?? They must be the worst parents in the world! I mean, he’s not even wearing a mask; he basically just changed clothes. And why is his skin so pale when he’s Prince Adam and all of a sudden he has a tan when he becomes He-Man? Does he spray-tan when he changes and they just don’t show it on camera? Something about this whole thing just doesn’t seem right anymore.”
My perspective has also dramatically changed when it comes to how I view the end of summer. When I was growing up this was the absolute worst time of the year. The summer is ending and all you can think about is how many days left of freedom you have until school starts… four days left, three days left, and so on. Now that my kids have had a (what seems like) nice 27-week break in between camp and school, I find myself counting the days as well. But this time it’s four more days until freedom starts, three more days, and so on. So to celebrate this joyous time of the year, what would be more appropriate than some money-saving tax tips related to the end of summer?
Day Camp Expenses: Camp expenses are an often-missed tax break and this can be a nice chunk of change you’re leaving on the table. If you pay someone to care for your children while you go to work, then the expenses count towards the Dependent and Child Care Tax Credit. The reason it’s missed so often is that for school purposes only expenses below kindergarten age count. However, for camp purposes you can count all day camp expenses for children under 13 years old. Expenses for overnight camps do not count towards this tax credit. Also, keep in mind that both spouses must have earned income to qualify for this credit, so if one spouse is a stay-at-home parent then you won’t qualify.
Summer Rental Income: The late broadcaster, Arthur Godfrey, once famously said, “I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.” So while some may find it satisfying to pay taxes, I think they will find it that much more satisfying when they don’t have to pay taxes—provided it’s legal. Rental income on your vacation home is one of those legal loopholes where you can get away with earning some cash tax-free. Ordinarily, any rental income you receive is taxable. But there is one little-known exception that can be particularly useful this time of year. You can rent out your vacation home for up to 14 days per year and all the rental income you receive is tax -free, no matter how much you earn. You are not even required to report the income on your tax return. However, in order to qualify, the home must be used personally for 15 days or more during the year.
Garage Sale Season: Although the IRS usually likes to get their grubby little paws on every possible cent you earn, when it comes to the occasional garage sale, you generally do not have to report the income on your return. The reason? With these sales, you’re usually selling these items for much less than you paid for them so there really isn’t any gain to report. You may have just been thinking, “Who cares, I was never planning on reporting this income on my tax return anyway.” So here’s a different tip you may find helpful—consider donating the unsold items to Goodwill or a similar charity so you can deduct the fair market value of those items as charitable contributions.
Daniel Magence, CPA, Esq. is a principal at Pristine CPA Solutions, LLC (www.pristinecpa.com). Pristine CPA Solutions offers tax and accounting services to individuals and businesses of all sizes, whether its tax returns, bookkeeping, payroll services, or personal income budgeting. He can be reached at [email protected] or 201-326-6908 if you have any questions or comments, or are interested in using Pristine CPA’s services. Feel free to contact us for a free consultation.
By Daniel Magence, CPA, Esq.
