The Fourth of July is over, but if your neighborhood is anything like mine, you'll be hearing fireworks for another week or so. Yes, my neighbors are pyrotechnic scofflaws.
Even if you don't participate in the literal lighting of firecrackers or bottle rockets post-July-4, there are still plenty of metaphorical tax fireworks that you can take advantage of as we head into the heart of summer.
Here are five easy tax moves to consider in July.
1. Get storm ready.
We've had four named tropical systems so far this Atlantic/Gulf of Mexico hurricane season. So far, thank goodness, there's been no major damage to the United States. But Mother Nature is making up for it in other ways. Tornadoes touched down in the South over the long Fourth of July holiday weekend. Wildfire season is raging in New Mexico, Arizona and California.
Since we can't prevent natural disasters, which pop up year round, we need to be ready for them. The ol' blog's special Natural Disasters Resources page has physical and financial preparation tips.
2. Beat the heat.
Just plain on summer heat can pose problems for lots of folks. If you find your air conditioning system just can't make it through another summer, you might be able to get some tax help for your new unit. Thanks to a provision in the most recent tax extenders bill enacted last December, formally known as the Protecting Americans from Tax Hikes (PATH) Act, some residential energy-efficient upgrades, like a new A/C, could qualify you for a tax credit of up to $500.
Don't forget those who can't afford similar cooling moves. Here in Central Texas, Austin-based Family Eldercare is in the middle of its 26th annual fan drive to provide elderly, disabled and or low-income individuals and families who have no or poor air conditioning with cooling devices. I suspect there are similar programs across the United States. If you help one of them out, your donation could be tax deductible.
3. Keep the giving going.
Since you're already in the giving mood, consider moving your end-of-year donations into July. Summer typically is a slow time for charitable contributions, but nonprofit groups must meet the needs of those who depend on their services year round. Your midyear donation can help immensely. And it's just as tax deductible as long as you follow the tax code's charitable giving rules.
4. Charity begins at home.
Now's the time to finally take heed of that perennial piece of financial advice, pay yourself first. That includes not only putting aside a little each month into an emergency fund, but also socking away some cash for your eventual retirement.
The tax code helps here, too. Traditional IRA contributions could be tax deductible. You don't get such a tax break for money put into a Roth IRA, but you won't owe any taxes when you start taking distributions. And put at least enough into your workplace tax-deferred 401(k) plan to get your employer's matching contribution.
5. Examine your investments.
Investing is always a challenge. Then things like Brexit happen. While you should never react in haste, neither should you put your portfolio on autopilot. A midyear evaluation of your assets can give you an idea of what holdings you should consider selling. Some you'll want to dump and take the loss. For those that you think have peaked, you'll want to cash them out now. Either way could provide tax benefits.
If you're like me, you're in a low enough tax bracket so that any investment income — qualified dividends, capital gains distributions or capital gains if you make a profit on an asset's sale — will be taxed at a maximum 15 percent rate. That's substantially lower than five of the current ordinary tax rates. And some folks won't face any capital gains taxes at all.
And if you also have some investment losses, welcome to the club. But at least they can help offset your taxable gains so you won't face a tax bill.
But wait, there's more: I know, you want to get back to the beach or golf course or whatever way you spend your summers. But take a few more minutes to check out the ol' blog's right column. That's where you'll find even more July Tax Moves under the heading of the same name.
If the tips in this post or those others listed in the adjacent column apply to your personal tax situation, take advantage of them. The tax savings they could provide might just help cover your summer recreational costs.
And that's definitely something worth setting off some fireworks.
