It’s August. Already! How did this final summer month sneak up on us, or at least on me?
Maybe it was all the other distractions.
The presidential campaign has been unusual, to say the least. The Paris Olympics kicked off with a controversial opening ceremony (I loved it!), and still have more than a week to go. Then there’s the unrelenting heat wave across the United States. And, of course, millions of folks have been on vacation.
So none us can be blamed for not keeping track of the flipping calendar page.
But if you want to save some tax dollars, you do need to also focus a bit on taxes this month. Here are four August tax moves to consider.
1. Make your tax holiday shopping list. Shoppers in 15 states can get some tax-exempt bargains at August back-to-school sales tax holidays.
Two sales-tax-saving events started in July and run into August. They are underway in Florida (through Sunday, Aug. 11) and Ohio (through Thursday, Aug. 8). Thirteen other sales tax holidays start this month. Those are in Arkansas, Connecticut, Iowa, Maryland, Massachusetts, Missouri, New Jersey, New Mexico, Oklahoma, South Carolina, Texas, Virginia, and West Virginia.
In addition to check the details of the various August sales tax events, you also might want to review these 6 shopping tips to maximize sales tax holiday savings.
2. Gather your kids' camp receipts. While your youngsters aren’t in class, are they spending their summer free time at a day camp? Parents like these because they offer some supervision while moms and dads are at work. Day camps also are less expensive that their sleep-away versions.
But few day camps are free. The day camp costs, however, can count toward the child and dependent care credit. So, if you haven't maxed out your child care costs, round up those day camp receipts to get the most out of the child and dependent care credit, which (like all credits) provides a dollar-for-dollar reduction of any tax you owe.
You might have noticed that I keep repeating day camp. That’s because the costs of a day camp, not the longer sleep-away ones, are eligible for the tax credit. How much? Up to $3,000 spent to look after one child, and up to $6,000 for the care costs two or more kids count toward the tax credit.
3. Get everyone’s part-time work documents in order. Many young people spend their summer working. This time-honored rite of passage offers good lessons on responsibility and money management. It also could have tax implications, as discussed in my mini tax primer for students with summer jobs.
Tax considerations of summer jobs don’t just apply to younger workers. Taxes are a part of the equation for anyone of any age who filled some free summer hours 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.
Regardless of the taxpayer’s age, any earnings, summer or year-round, that aren’t subject to withholding likely need to be covered by making estimated income tax payments, which take into account self-employment (SE) tax obligations. Yes, SE tax is a factor, even in short-term jobs.
For a bit of a head start on the next month, the third quarter’s estimate tax deadline is Sept. 16, a day later since the regular 9/15 due date is on Sunday.
4. Adjust withholding to reflect life changes. Added income from jobs isn’t the only thing that could affect your taxes. Life events, such as 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: If you’re on a late summer tax task roll and want more, check out the August Tax Moves in their regular place 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. 15 filing extension deadline.
I know you just want to finish out a relaxing summer, but if you also pay attention to some tax tasks now, 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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