This month is a good time to make some tax moves that could save you some (or more) dollars and/or keep you out of tax trouble. Here are five to consider.
1. File your 2022 return by Aug. 15.
OK, this applies only to a few, relatively speaking, taxpayers. But Tax Day, whenever it is, is important. So, this is the number one tax move to make if you live or have a business in one Florida or either of two California counties.
Aug 15 is Tax Day for taxpayers in Broward County, Florida, where they endured severe storms, tornadoes, and flooding in mid-April, and in California’s Modoc and Shasta Counties, which in late February were hit by severe winter storms that produced flooding, landslides, and mudslides.
2. Make your tax holiday shopping list.
This, too, is for special constituencies. Specifically, shoppers in 14 states can get some tax-exempt bargains this month at back-to-school sales tax holidays.
Florida’s summer event started last month and runs through Aug. 6. Eight more — in Arkansas, Iowa, Missouri, New Mexico, Ohio, Oklahoma, South Carolina, and West Virginia — are the first weekend of the month. The events in Connecticut, Maryland, Massachusetts, New Jersey, and Texas are later in August.
My post August is prime sales tax holiday time has details on the dates and links to information on just what is sales tax-exempt during each state’s tax holiday. You also might want to review these 6 shopping tips to maximize sales tax holiday savings.
3. Gather your kids’ camp receipts.
Before your youngsters head back to classrooms, how did they spend their free summer days? If it was in day camp while you were at work, those expenses could provide a tax break. Day camp costs — and day camp only; not overnight camps — can count toward the child and dependent care credit.
The amount of expenses that count toward the care credit are $3,000 to look after one child, and up to $6,000 for the care costs two or more kids. I know, you’ve likely spent more than that.
And the actual credit, based on income-related calculations, is a percentage of those costs. The math means the maximum credit is $1,050 for care of one child, or $2,100 for costs related to caring for two or more youngsters.
If you haven’t maxed out your child care costs, round up those day camp receipts. You want to get the most out of the child and dependent care credit (and any tax credit) since a tax credit provides a dollar-for-dollar reduction of any tax you owe.
4. Get part-time work documents in order.
Documentation also is key if instead of needing constant oversight, the young people had a summer job, or two or more. This time-honored rite of passage offers good lessons on responsibility and money management. It also could have tax implications, five of which are discussed in my post on tax considerations for young workers and their parents.
Taxes are a consideration, too, for anyone who filled some free summer time with gig work. These side hustles will affect your final tax bill, even if most of your adjusted gross income comes through a salary subject to withholding. The most obvious concerns are estimated income tax and self-employment tax payments on the non-salaried earnings. The Internal Revenue Service’s online Gig Economy Tax Center has more on these tax issues.
5. Adjust withholding to reflect life changes.
Additional jobs aren’t the only thing that could affect your taxes. Life events like a change in marital status (saying “I do” or “I’m outta here“) or having a child can all affect taxes.
The easiest way to account for them is to adjust your paycheck withholding. The IRS’ online Tax Withholding Estimator can help you assess those changes, as well as possible credits, adjustments and deductions they offer, and determine whether you need to give your employer a new Form W-4 .
The earlier you make the withholding changes, the less effect they’ll have on your paychecks. That’s particularly important if you must increase the amount taken out of your pay. Making the change in early in August will spread the larger amount taken from your pay over periods for the last five months of the year.
More August tax tasks: Want more tax tasks? Then check out the August Tax Moves over in the ol’ blog’s right column.
As always, they are just below the August Tax Moves header that’s under the clock counting down the days until the Oct. 16 filing extension deadline. And yes, that final tax return filing deadline is one of the tax moves discussed in that column.
I know you just want to finish out the summer, but if you pay attention to some tax tasks, too, you can chill not only during the rest of these last lazy, hazy days, but also at tax filing time next year.
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