Summer tax tips - Wayne-Wilson News Leader, Fremont, NC

28 June 2007 — Summertime may be get-away time, but you can’t get away from the tax implications that accompany most financial matters. Being aware of the tax issues — and preparing yourself for some tax breaks — sure beats putting your head in the sand, even if you are at the beach.

Tips for Working Students

All employees have income tax withheld from their pay, right? Not necessarily. You may be exempt from withholding if:
- you can be claimed as a dependent (usually on a parent’s return),
- your total 2007 income will not be over $5,350,
- your unearned income (interest, dividends, etc.) will not exceed $300, and
- you had no income tax owed for 2006.

You’ll still have to pay Social Security and Medicare taxes, but skipping unnecessary income tax withholding will put more money in your pocket now. Read Form W-4 carefully before filling it out for your employer.

If customers tip you, those tips are taxable. You must keep track of the amounts, include them on your tax return, and — if they total $20 or more in a month — report them to your employer by the middle of the next month.

Check out IRS Publication 531, Reporting Tip Income, IRS Publication 1872, Tips on Tips (for food or beverage industry workers), and Form W-4, Employee’s Withholding Allowance Certificate (with worksheets to figure how many allowances to claim).

Summer Day Camp

Many working parents must arrange for care of their younger children under 13 years of age during the school vacation period. A popular solution — with favorable tax consequences — is a day camp program. Unlike overnight camps, the cost of day camp counts as an expense towards the child and dependent care credit. Of course, even if your childcare provider is a sitter at your home, you’ll get some tax benefit if you qualify for the credit.

Check out IRS Publication 503, Child and Dependent Care Expenses.

Job-Related Move

Moving expenses may be deductible if your move is job-related and you meet certain tests. If your employer reimburses you for moving expenses, that amount may be taxable income. Generally, up to $250,000 of gain ($500,000 filing jointly) from the sale of your home is not taxable. New homeowners, be aware that mortgage interest, points and real estate taxes may be deductible.

For more details and information see IRS Publication 523, Selling Your Home, and IRS Publication 521, Moving Expenses.

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