Your mind’s probably more on destinations than deductions this time of year, but summer is still a great time to start looking for ways to minimize your 2023 tax bill. Here are some ideas.
• Create a tax forecast. Create a tax projection this summer to determine if the steps you’re taking now will help you avoid a large tax bill at the end of the year. If you’re a limited partner in a partnership or a shareholder of an S corporation, consider using a 3- or 5-year rolling average of previous dollar amounts reported on past Form K-1 tax forms. This approach won’t always yield an accurate number, but using a rolling average can help eliminate some of the year-to-year volatility.
• Rent your home. While the short-term rental market has slowed down in many parts of the country, there are still plenty of vacationers looking for a place to get away to this summer. If you rent out your main home or a vacation home part of the time, you may be entitled to deductions like other landlords. This includes the rental-related portion of mortgage interest, property taxes, repairs, utilities, insurance, etc. Keep in mind, if your personal use exceeds certain limits, you can’t deduct a loss. And if you rent for less than 14 days, the rental income is tax free!
• Send young kids to camp. Who’s watching the kids while school’s out for summer? Depending on your situation, you may be able to claim a Child and Dependent Care Tax Credit for the cost of sending children under age 13 to summer day camp. However, the cost of overnight camp doesn’t qualify for the credit.
• Take a business trip. Spend some time seeing a different city this summer while you’re on a business trip. When you travel for business, you can generally deduct expenses — including airfare, lodging and meals — attributable to the business portion of the trip. But you must spend more time on business matters while you’re away than you do on sightseeing or other personal activities.
One of my primary objectives is to help you achieve your financial goals through a holistic approach that is tax-efficient in my wealth management and tax resolution practice. For more information, visit www.fredtfoxiii.com.
Fred T. Fox III is a Lawton native who owns his own business.
