July 10, 2024 | Posted in:

Avoid the Summertime Tax Blues With These Planning Tips

If you picked up a part-time job for some extra summer spending money, you may have to set aside some of your cash for taxes. Here are some tips to help you manage the taxes on your summer earnings:

Take advantage of tax-free earnings limits.

If you anticipate making less than the annual standard deduction ($14,600 for single taxpayers in 2024), none of your earnings are subject to federal taxes! If possible, earn at least that amount each year to maximize your tax-free earnings. Remember, this only applies to earned income like your summer job. These rules do not apply to sources of income such as interest income or dividend income.

Tax Tip: If your annual earnings will be less than the standard deduction, you can claim EXEMPT on your Form W-4 if you work part-time for a business. That prevents federal income taxes from being withheld from your paycheck. And don’t forget to review state and local taxes and regulations, which can be another source of tax surprises!

Review the need to make estimated payments.

As an independent contractor, you are responsible for paying all taxes on your earnings. This is done by making quarterly estimated tax payments to the IRS using Form 1040-ES. In addition to income taxes, contractors also need to pay self-employment taxes of 15.3% on earnings at the federal level. You may also need to pay estimated taxes at the state level.

Tax Tip: Track your expenses and save receipts. By doing this, you can subtract eligible expenses like mileage and supplies from your gross earnings. Use this lower income number to calculate your self-employment tax and correctly estimate your quarterly income tax obligation.

Closely monitor tax withholdings.

As an employee, your employer withholds taxes based on what you claim on Form W-4. The tax tables used by this form to calculate your withholdings unfortunately do not account for seasonal jobs. This typically results in paycheck withholdings being too low for supplemental income workers and too high for students working during the summer.

Tax Tip: If you anticipate earnings in excess of the standard deduction, request a revision of your withholdings. Use tools on the IRS web site, review last year’s tax return, or ask for help to estimate the correct amount to withhold. From there, ask your employer to increase or decrease your federal and/or state withholdings.

With a little tax planning, you can ensure that your summer job or side hustle provides the income you’re looking for without the disappointment of unexpected taxes. Please call if you have any questions.

Tame Your Summer Energy Costs

Summer temperatures can feel just fine when you’re spending time outdoors, yet most of us want our homes to always feel cool and comfortable. That often means cranking up the air conditioning and turning on all the ceiling fans, which typically leads to higher energy bills until fall arrives.

Fortunately there are some ways to keep your home cool without blowing the budget on your utility bill and needing to make cuts elsewhere. Consider these energy-saving steps this summer:

  • Invest in a programmable thermostat. A programmable thermostat makes it easy to adjust the temperature in your home up or down based on your schedule and when you want to save energy. For example, you could have it set to a higher temperature while you’re at work during the day and a different temperature overnight while you sleep.
  • Set your ceiling fans to run counterclockwise. Setting ceiling fans to counterclockwise creates a downdraft, which helps build a direct, cooling breeze that reduces the need for air conditioning. This is the opposite of winter, when you’ll want to set your fan clockwise so it creates an updraft that circulates warm air through the room.
  • Use fan and ventilation strategies. Make sure to turn off ceiling fans when no one is in the room, use bathroom fans to reduce heat and humidity during and after a shower, and have all fans in your home vented to the outside.
  • Schedule routine maintenance for your HVAC system. Clean and maintain your air conditioning system on a regular schedule by a professional. This will ensure your system is working at optimal efficiency at all times, and will likely maximize the lifespan of your HVAC unit.
  • Use heat-producing appliances at night. Use your dishwasher and oven at night if your schedule permits. If food needs to be heated, consider using an air fryer or microwave.
  • Prevent air leaks. Prevent hot air from leaking into your home by sealing cracks and openings around windows and doors with caulk or weather stripping. Installing foam gaskets behind outlets and switch plates on walls can also keep cool air in and hot air outside where it belongs.

By being more intentional about the energy you use and taking steps to prevent energy loss, you can stay cool this summer without breaking the bank.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.


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