It's summertime, and taxes might not be foremost on your mind. However, there are some uncommon tax credits and deductions that can help families save. Did you know the price of summer camp is a potential tax credit? In this post I'll examine three tax deductions that might prove beneficial come April 2014. I spoke with Meredith Johnson, CPA, CFP at Burr Pilger Mayer, who offers her insight on this subject.
Tax Savings Tip 1: SUMMER DAY CAMP
This might sound too good to be true. And, yes, there are some limitations. For instance, this credit only applies to day camp (not overnight camp). However, taking advantage of the Child and Dependent Care Credit can save you money. Meredith offers this example: "The maximum credit is up to 35 percent of qualifying expenses (the percentage depends on income), up to $3,000 for one child or $6,000 for two or more. If your family's adjusted gross income is more than $43,000, the credit percentage is 20 percent, for a maximum of $1,200 for families with two or more qualifying children. Qualifying children must be your dependents under age 13, and your family must have earned income." For more information and a flow chart which can help you determine eligibility check out IRS Publication 503.
Tax Savings Tip 2: ENERGY-EFFICIENT HOME RENOVATIONS
Having completed a remodel this year, this is a deduction I'm looking forward to taking advantage of myself. Because I replaced old construction with energy-efficient windows, doors and insulation, I can claim the credit. Meredith explains, "Items can be covered up to $500, based on 10 percent of the project cost. If you spend $3,500, for example, your credit will be $350. The $500 is a lifetime maximum, so be sure to subtract any credits you might have claimed previously. If you add solar or wind power to your home, 30 percent of the cost of the equipment may be claimed as a credit, with no cap." The IRS publication, Get Credit for Making Your Home Energy Efficient has even more information about this credit.
Tax Savings Tip 3: SCHOOL TUITION (for children with learning disabilities or special needs)
This deduction was first brought to my attention in a publication for parents of Chartwell School for dyslexic children, where I'm on the board of trustees. As this is a medical tax deduction, a letter from a doctor is required. Assuming you qualify (you'll want to check with your tax advisor to confirm), these are the expenses you're allowed to deduct: tuition for a school that has educational curriculum specifically designed for children with learning disabilities, tutoring by a qualified LD teacher, books and other learning materials, transportation expenses and diagnostic evaluations.
According to Meredith, here's how it works: "The cost of these programs is deducted as a medical expense, which is an itemized deduction on Schedule A of an individual's tax return, and it is subject to a 10 percent floor. For example, a family with an $100,000 adjusted gross income would be able to deduct all medical costs above $10,000; if tuition were $20,000 and they had no other medical expenses, their deduction would be $10,000." Here is more information from the IRS on this subject.
Everyone's tax situation is different. If you think this information might apply to you, don't hesitate to reach out to a qualified tax professional for help. Also, consider your state's tax laws to see what breaks might be available there too. Be mindful of tax savings year round so that when it comes time to file your return you can SaveUp!
This post was written by SaveUp's personal finance contributing writer, Catherine Hawley, CFP.