A little summer planning can save you money in taxes
If you are getting married this summer, you’re probably thinking about rings, flowers, cakes and honeymoon destinations.
Maybe you should also be thinking about income taxes.
Seriously.
While summer isn’t typically the time of year when income tax is on your mind, certain summertime activities may entitle taxpayers to money-saving tax deductions and credits, or avoid future tax problems, said Eric Erickson, Internal Revenue Service spokesman for Louisiana.
“Normally, December is when we are tuned in,” he said. “It may be that a lot of us want to stop thinking about it. It’s not on our radar screen.”
Some questions to consider this time of year:
•Are you planning a wedding?
Your marital status on Dec. 31 determines whether you are considered married for that year. Your joint tax deductions may exceed the standard deduction, allowing you to itemize deductions. And filing jointly is usually best, but you may want to figure your taxes separately and compare.
“They need to look at what’s going to benefit them as a couple,” Erickson said. “If you’re going to get married, it’s a good idea to research beforehand so that when filing season is upon us it’s not a surprise.”
•Are you moving?
Moving expenses may be deducted if your move is job-related and you meet certain tests. Also, if your employer reimburses you for expenses, that may be taxable income.
Keep in mind that generally, up to $250,000 of gain ($500,000 filing jointly) from the sale of your home is not taxable. New homeowners should be aware that mortgage interest, points and real estate taxes may be deductible.
If you submit a change of address to the Postal Service, the IRS will be notified automatically.
•Will your kids go to summer day camp?
The cost of day camp counts as an expense toward the Child and Dependent Care Credit.
“It’s definitely something people need to investigate,” Erickson said, adding that up to 35 percent of qualifying expenses may be counted.
He advises parents to look at Publication 503. Certain criteria must be met – a spouse cannot be considered a day camp, for example – and how much you can count depends on your family income. Also, the child must be under 13.
Title insurance is a different animal
•As the insurance business goes, none may be quirkier than title insurance, which guarantees clear ownership of a property to buyers and their lenders.
In return for a one-time premium, the insurance agent will search public records for any hint of trouble in the line of ownership or building rights and the underwriter will assume the risk of any hidden problems should they arise. Title companies are also sometimes responsible for performing settlement services as well.
Sounds simple enough, except that buyers and sellers don’t shop for title insurance the way they do for auto, home or life policies.
Instead, buyers usually pay for the lender’s policy and, on the West Coast customarily, sellers pay for the buyer’s policy. Since home buying is a rare activity for most people, mortgage lenders, real estate brokers, home builders or attorneys typically refer the parties to a title company.
A survey by Bankrate.com found average premiums vary significantly, from nearly $1,500 in New York to $439 in North Carolina.
The national average was $756. Compare that with Iowa, which has instituted its own government-run insurance program. Cost: $110 for $500,000 in coverage.
So is there a better deal out there in title insurance?
“Certainly, consumers can shop around for it,” says Lorri Ragan, spokeswoman for the American Land Title Association, an industry group. “In the scheme of things, it’s the last thing on a consumer’s mind and realistically they’re probably not going to take the time to do that.”