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Client Update Newsletter: June 2023

Summertime offers unique tax and money saving opportunities for the whole family.

In this month’s newsletter, find out how day camps for your kids may be tax deductible, if you know the rules! And summer is a time when household expenses creep up, so there is an article identifying common causes and ideas on how to manage the extra expense.

Also read about shielding your emergency fund from inflation and why you should always turn to a trusted tax professional if you receive a letter from the IRS.

Contents

Make Your Child's Summer Break a Tax Break!

Make Your Childs Summer Break a Tax Break imageAs a busy working parent, you may be on the lookout for activities that are available for your kids this summer. There may be a solution that’s also a tax break: Summer camp!

Using the Child and Dependent Care Credit, you can be reimbursed for part of the cost of enrolling your child in a day camp.

Am I eligible?

  1. You, and your spouse if you are married, must both be working.
  2. Your child must be under age 13, your legal dependent, and live in your residence for more than half the year.

Tip: If your spouse doesn’t work but is either a full-time student, or is disabled and incapable of self-care, you can still qualify for the credit.

How much can I save?

For 2023, you can claim a maximum credit of $1,050 on up to $3,000 in expenses for one child, or $2,100 on up to $6,000 in expenses for two or more children.

What kind of camps?

The only rule is: no overnight camps.

The credit is designed to help working people care for their kids during the work day, so summer camps where kids stay overnight aren’t eligible for this credit.

Other than that, it doesn’t matter what kind of camp: soccer camp, chess camp, summer school or even day care. All of these are eligible expenses for this credit.

Other ways to use this credit

While summer day camp costs are a common way to use this credit, any cost to provide care for your children while you are working may be eligible.

For example, you can use this credit to pay a qualified day care center, a housekeeper or a babysitter to take care of your child while you are working. You can even pay a relative to care for your child and claim the credit for that expense, as long as the relative isn’t your dependent, minor child or spouse.

This is just one of many possible tax breaks related to children and dependents. Please call if you have questions about this credit, or if you’d like to discuss any other tax savings ideas.


Shield Your Emergency Fund From Inflation

Shield Your Emergency Fund From Inflation imageMost financial experts suggest keeping three to six months worth of household expenses in savings to help in case of emergency. But with record inflation, that task just got a lot harder to accomplish as virtually every safe place to put your emergency funds will not provide interest rates that keep pace with inflation. But that does not mean you cannot increase the rate of return on these funds.

Here are some ideas to reduce the impact of inflation on your emergency funds.

Higher rates are out there, you just need to be aware and willing to actively manage your emergency funds to ensure you are attacking the risk of inflation.


Ideas to Save Money this Summer

Watch Out for These Summer Spending Traps imageSummertime is often the best time of the year to spend time with family and plan something fun. With the kids out of school, plenty of vacation time accrued at work and a fully funded travel budget, you may even be able to book a getaway somewhere tropical, historic or particularly appealing to your family’s interests and tastes.

But there are summer spending traps to be aware of — both on vacation and at home. If you want to get through the summer season without breaking the bank, watch out for these sneaky, yet prevalent expenses that can spiral easily when everyone is home together.

Summer is often full of surprises, but you shouldn't let the coming months drain your bank account.


Never Take on the IRS Alone!

Sleuthing your way through a tax audit by yourself is not the same as fixing a leaky faucet or changing your oil. Here are reasons you should seek professional help as soon as you receive a letter from the IRS:



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