August is here, but few of us have put out the welcome mat. The eighth month of the year tends to be one of the hottest of the year. Most of the summer’s fun events have come and gone. And school is about to start.
OK, that last point is a positive for many parents who are running out of patience with the kids being underfoot all the time.
Those moms, dads and all other shoppers in 13 states at least will get some state sales tax holidays to make this muggy month a bit more tolerable. Those tax-free events are among the five cool tax moves to make in this hot month of August.
1. Take advantage of no-tax shopping.
Tax holidays are bad tax policy. They don’t bring new shoppers into stores, but rather prompt those who planned to buy anyway to shift their shopping to the tax-free period.
Still, folks seem to like the holidays and this year there were/are 16 of them. Thirteen are in August, with nine of them taking place or starting on the first weekend of August, which in many instances includes Friday as part of the weekend.
Since classes are about to start, most of these events are advertised as back-to-school shopping opportunities. That includes not only the standard notebooks and pencils, but also in some place computers.
You can find details and links to the states’ officials lists of tax-free eligible items in my comprehensive (and color-coded!) tax holiday 2019 post, but here’s a quick look at the states with their upcoming August sales tax holiday dates in parentheses:
|Arkansas (Aug. 3-4)||Maryland (Aug. 9-17)||Oklahoma (Aug. 2-4)|
|Connecticut (Aug. 18-24)||Massachusetts (Aug. 17-18)||South Carolina (Aug. 2-4)|
|Florida (Aug. 2-6)||Missouri (Aug. 2-4)||Texas (Aug. 9-11)|
|Iowa (Aug. 2-3)||New Mexico (Aug. 2-4)||Virginia (Aug. 2-4)|
|Ohio (Aug. 2-4)|
2. Shop for educational tax help.
Don’t limit your back-to-school shopping to retail locations. Do your homework on the many ways that your dear old Uncle Sam can help cover educational costs, from Kindergarten through high school and on to college.
One of the best bargains is a 529 plan. The tax benefits for these state-administered savings accounts include, among other things, tax-free account growth, no tax on distributions used to pay allowable education costs (which were expanded by the Tax Cuts and Jobs Act) and in some states a deduction on those state returns.
Every state offers at least one 529 and your choice isn’t limited to just those offered within your state’s borders. So shop around for a 529 that fits your student’s and family’s needs.
3. Use your medical FSA funds for school-related costs.
A flexible spending account, or FSA, is a popular employer-provided workplace benefit. You contribute to an FSA via paycheck contributions that are made before taxes are calculated on your income, lowering your overall tax bill.
The current maximum FSA contribution amount, which you selected last fall when you signed up for 2019 benefits, is $2,700. You then use FSA money to pay or get as reimbursement for your out-of-pocket expenditures on qualified medical expenses.
If you maxed out, you want to make sure you use as much of the FSA money as possible. If you don’t, it goes back to your employer.
One of those allowable and reimbursable expenses is vaccinations that most schools and many colleges require students to get before enrolling. If you’re unsure of the requirements where you live, check out the Centers for Disease Control’s interactive map of school vaccination requirements and exemptions.
And if you have to pay a portion of the immunization shots’ costs, use your FSA money.
4. Collect camp receipts.
A dependent-care FSA is another popular employee benefit. Like their medical counterparts, these tax-favored accounts let you save pretax money to cover child care.
Day camps count as child care for older children. If this summer you enrolled your youngsters in a day camp so they would be supervised while you (and your spouse, if you’re married) worked, you can use dependent care FSA money to cover the costs.
Quick reminder: Day camp only costs qualify.
Sleep-away camp costs aren’t eligible.
No care FSA? No problem. Look into claiming the child and dependent care tax credit. Day camp expenses can be counted toward figuring this tax break.
There is a limit on both expenses and the percentage of them that can used to figure the credit. Bottom line is that the maximum child care credit is $1,050 for care of one child or $2,100 for costs related to two or more youngsters. While that might not seem like much, it is at least a tax credit, which offers a dollar-for-dollar reduction of any tax you owe.
5. Alert the health marketplace of any changes.
Yes, a court challenge of the Affordable Care Act, known as Obamacare, is progressing. But until there if final legal word, which likely eventually will come from the Supreme Court, the law remains in effect.
So does the tax help, the Premium Tax Credit (PTC), that’s available to eligible low- and moderate-income individuals and families to help pay for medical insurance obtained through the healthcare marketplace at HealthCare.gov.
It’s a refundable tax credit, which means you could get money back if you don’t owe any tax.
If eligible, you can claim the PTC when you file your annual return. Most people, however, receive advance PTC payments.
Certain changes to your household, income or family size may affect your tax credit. Let the marketplace know of these changes ASAP so you’re not hit with a surprise when it comes to your tax refund or the amount of tax you owe.
More monthly tax moves: Want some more hot August tax moves?
You’ll find them over in the ol’ blog’s right column, under the August Tax Moves header that’s just below the clock counting down the days until the Oct. 15 filing extension deadline.
Find a shady spot, grab your favorite cool drink and check them out.