Summer’s almost over. How could some of your activities impact your income taxes for this year?
Depending on where you live and what your calendar has looked like since May, you’re either relieved or sad that summer 2023 is drawing to a close. June, July, and August are great for kids who have been out of school, and maybe not-so-great for working parents who’ve had to scramble for child care. If you’re in a region that has harsh winters, you may be trying to cram everything you can into the warm weather months.
As busy as summers can be, you probably haven’t spent a lot of time thinking about income taxes. But depending on what you’ve been up to, you should be aware that some of your current activities can affect your 2023 Form 1040. Here’s a look at five of them.
A Wedding in the Family
Did you or someone in your immediate family get married this summer? Or is there a wedding planned for later this year? If yes, and if it involves a name and/or address change, the IRS wants to know – in addition to Social Security and the USPS, among others.
Of course, the same is true if you’re moving or have moved this year. You’ll need to complete and submit Form 8822, Change of Address.
If you’re moving or have moved in 2023, you need to complete and submit this form.
Sending a Child to Summer Day Camp
In some situations, you may be able to claim the Child and Dependent Care Credit if your child goes to a qualified day camp. There are three primary restrictions:
Working Part-Time
Even if a part-time job doesn’t earn enough for you to file an income tax return, you should still file a Form 1040 to claim any refund that might be owed you. An income tax return is expected if you make more than $600 during the tax year, either for gig work or a small business. If this is your first year filing for either, we can help you understand what’s going to be required of you.
Making Home Improvements
Summer and fall can be good times to finally tackle those home improvement jobs you’ve been putting off. The weather may be nice enough where you are to leave the doors and windows open, and you might even be able to enlist the help of kids who are home from school.
If you’ll be making changes to reduce your energy consumption, there are tax credits that may be available to you. Energy-efficient improvements to your home may qualify for a tax credit up to $3,200, thanks to the Energy Efficient Home Improvement Credit. This credit is reserved for installations of things like water heaters, exterior windows and doors, and heating and air conditioning units. You’ll need to complete Part II of Form 5695 to get the credit.
The IRS Form 5695
Part I of the same form is reserved for Residential Clean Energy Credits. Like the Energy Efficient Home Improvement Credit, the credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who installed equipment for solar, wind, and geothermal power generation should apply for the credit. In addition, solar water heaters and fuel cells and battery storage may also qualify.
Questions? Ask us.
Business Trips
Have you traveled for business purposes this summer? Some or all of your expenses may be deductible on your tax return. Here, too, we can go over the rules with you to determine whether your trips were deductible and how you handle them on your income taxes.
Planning Ahead?
If you have some spare time this summer and want to get a jump on your 2023 taxes, there are some actions you can take, including:
Organize your business expense receipts. If you don’t have a system for this, now’s a good time to develop one. Many personal finance and small business accounting applications offer tools for importing and categorizing your receipts and other expense documents. Some even let you scan papers with your phone and store them in digital form.
A paper system is just fine, too. You can use file folders or large envelopes to separate items by month or type, for example. Store them in a safe place and keep them for at least three years after you file your income taxes.
Catching up on any estimated taxes that are due. Self-employed businesspeople are required to estimate the amount of tax that will be due every quarter and submit it to the IRS (and state, where applicable). This isn’t easy. We can help you get started if you’ve never taken this important task on.
We hope you’re enjoying the last weeks of your summer. But we’re here to help if you have questions about anything we’ve discussed here or any issues you see looming for your upcoming 2023 income taxes.