Tuesday, June 13, 2006

Some Summertime Tax-Cutters to Consider

Category: Tax Law and Planning

From James A. Jimenez, CPA, partner at Fass & Co. in Parsippany, NJ:

"Take Advantage of Some Summertime Tax-cutters

Make your summertime fun even more enjoyable by adding tax savings. With some advance planning, you can make it happen. Here are some tax-saving ideas.

If you have summer travel plans and the primary purpose of your trip is business, you can deduct all the travel costs to and from your business destination and all other business-related costs even if you add on a few extra days for pleasure. You can’t deduct costs related to the pleasure portion.

Including a spouse or friend on your trip is permissible, but you can’t deduct the additional costs for that person. For example, the added cost of a double room over a single room won’t be deductible. Be sure to keep track of your itinerary, as well as your receipts, so you can clearly establish the business purpose of your trip and support your deductions.

If you own rental property, the expenses you incur to inspect your investment are deductible. These would include your travel expenses, lodging, and 50% of your meals.

If you itemize your deductions, you can deduct the mortgage interest and property taxes paid for your vacation home. A boat or RV can qualify as a vacation home if it has sleeping quarters, cooking facilities, and a bathroom. If a retreat also serves as rental property, you can control your tax deductions by changing the number of days you use it for vacation.

If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

If you own a business, consider hiring your child for the summer. Your child can earn up to $5,150 tax-free this year, and your business is entitled to a deduction for the wages paid. You must pay your child a reasonable wage for the work performed. If your business isn’t incorporated, a child under 18 is not subject to FICA taxes. "

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