Summertime Tax Tips for those with Children
If you have kids you should know about a couple of things you could do this summer that might result in a break on your tax bill this year. Here are a few tips.
Hire your child. If you own a business, hiring your child for the summer can make good tax sense. You can deduct the amount you pay your child as a business expense. And the amount you pay your child is not subject to Social Security and Medicare taxes if your child is under age 18 and your business is a sole proprietorship or a partnership where the child’s parents are the only partners.
Help your teen fund an IRA. If your teenage child or grandchild gets paid for working this summer, you may want to take this opportunity to help them get a jump on saving for retirement by giving them some seed money for a Roth IRA. For 2019, contributions generally cannot exceed the child’s taxable compensation or $6,000, whichever is less.
Claim a tax credit for day camp expenses. You may be able to claim a federal tax credit for part of the cost of day camp if your child is under age 13 and attends camp so that you (and your spouse if you file a joint tax return) can work.
If you would like to schedule a strategy session and discuss your specific situation call Davis & Hodgdon at 802.878.1963 (Williston) or 802.775.7132 (Rutland).