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Summer is often a time for enjoying the longer days and warmer weather. For many small business owners, it’s also a period of increased activity and concentrated income. While you’re busy making the most of your peak season, it’s also the perfect time to implement proactive tax strategies that can lead to significant benefits when it’s time to file your tax return.

At Lightening the Load, we believe that year-round tax awareness is key to success. This blog post will guide you through essential tax planning tips for small business owners this summer to help manage your tax obligations and minimize your year-end tax bill.

1. Adjust Your Estimated Tax Payments

If your business experiences higher taxable income during the summer months, it’s crucial to revisit your estimated tax payments.

• Why it Matters: The tax system is pay-as-you-go. If your current year’s taxable income is higher than anticipated, increasing your estimated tax payments now can help you avoid potential underpayment penalties at tax time.
• Actionable Step: Review your taxable income from the first half of the year. If it’s higher than your initial projections, adjust your upcoming quarterly payments (due in September and January) to reflect your increased earnings.

2. Review and Accelerate Eligible Deductions

Summer can offer a moment to assess your business’s needs and make purchases that also offer tax advantages.

• Mid-Year Deduction Check: Take stock of your business expenses incurred so far. Ensure all receipts and records are meticulously organized.
• Consider Future Purchases: If you plan to acquire new equipment, machinery, or even substantial office supplies later in the year, doing so before year-end can allow you to claim applicable deductions (like depreciation) sooner, offsetting your current year’s taxable income.

3. Optimize Record-Keeping

With increased summer activity, maintaining organized records is more important than ever.

• Daily Tracking: Ensure all income and expenses are recorded promptly. This includes sales, supply costs, payroll disbursements, and travel expenses.
• Categorization: Properly categorize every expense to ensure you don’t miss out on any legitimate deductions. Good categorization simplifies tax preparation immensely.

4. Explore Business Tax Credits

Don’t overlook opportunities to reduce your tax bill directly through credits.

• Research Eligibility: Use the summer months to research various federal and state tax credits that might apply to your business. These could be related to hiring certain employee groups, energy-efficient upgrades, or specific industry activities.
• Document Everything: For any credit you identify, ensure you are collecting and retaining all necessary documentation to support your claim.

5. Plan for Year-End Tax Moves

Use the summer to project your taxable income for the entire year. This projection can help you make informed decisions about your tax strategy in the coming months.

• Proactive Consultations: Consider scheduling a meeting with a tax professional in late summer or early fall. This allows ample time to implement year-end tax planning strategies, such as deferring taxable income or accelerating deductible expenses, before the tax year closes.

Embrace Proactive Tax Management

Summer isn’t just for fun; it’s also a prime time for strategic tax planning that can significantly impact your business’s tax position. By taking these proactive steps, you can avoid surprises and approach tax season with confidence.

At Lightening the Load, we’re here to support your small business with expert tax advice and personalized solutions. Let us help you make smart tax moves all year round.

Let us lighten your load.

 

As summer winds down and the new school year approaches, thoughts often turn to supplies, schedules, and learning. For parents and educators, this is also an ideal time to consider the tax benefits related to education expenses. Proactively understanding these deductions and credits can help you prepare for a more accurate tax return next spring.

At Lightening the Load, we’re here to guide individuals and couples through the tax landscape of education. This blog post previews key tax considerations before the fall rush.

Tax Benefits for Parents

If you’re paying for higher education or even K-12 expenses, certain tax benefits might apply:

• American Opportunity Tax Credit (AOTC): This credit can help offset the cost of qualified education expenses for eligible students in their first four years of higher education. It offers a maximum annual credit of $2,500 per eligible student, with a portion potentially refundable.
• Lifetime Learning Credit (LLC): This credit is for qualified education expenses for undergraduate, graduate, or professional degree courses, including those taken to acquire or improve job skills. It’s a nonrefundable credit worth up to $2,000 per tax return.
• Student Loan Interest Deduction: If you (or your spouse, or a dependent you claim) paid interest on a qualified student loan, you might be able to deduct a portion of that interest from your taxable income. This deduction can reduce the amount of income subject to tax.

Tax Benefits for Educators

For eligible educators, certain out-of-pocket expenses for the classroom can lead to a deduction:

• Educator Expense Deduction: If you are a kindergarten through 12th-grade teacher, instructor, counselor, principal, or aide, and you work at least 900 hours during the school year, you may be able to deduct up to $300 of unreimbursed business expenses. This includes costs for books, supplies, other classroom materials, computer equipment, and professional development courses related to the curriculum you teach.

Important Considerations for All

• Record-Keeping is Key: For all education-related deductions and credits, meticulous record-keeping is vital. Keep receipts for tuition payments, books, supplies, and any other qualified expenses. For higher education benefits, you’ll often receive a Form 1098-T, Tuition Statement, from the educational institution, which is crucial for your tax records.
• No Double Benefits: You generally cannot use the same educational expenses to claim more than one tax benefit. For example, if you claim the American Opportunity Tax Credit for a student, you cannot also claim the Lifetime Learning Credit for that same student’s expenses in the same year.
• Eligibility Requirements: Each credit and deduction has specific eligibility requirements, including income limitations and student enrollment criteria. It’s important to review these details carefully.

Prepare for a Tax-Smart School Year

By taking a moment before the fall rush to understand these education-related tax benefits, parents and educators can make informed decisions and gather necessary documentation. This proactive approach can help reduce your taxable income or your tax bill next spring.

At Lightening the Load, we’re here to support you on your tax journey, providing expert guidance and personalized advice. Let us help you navigate the tax implications of education expenses.

Let us lighten your load.

For many small businesses, summer isn’t just a season – it’s the core of their operations. Whether you run an ice cream shop, offer landscaping services, or operate a tourism-focused venture, your busiest months bring concentrated income. Understanding how to manage this period from a tax perspective is crucial, not just for the summer, but for preparing smartly for the slower seasons ahead.

At Lightening the Load, we guide small business owners through every tax cycle. This blog post outlines strategies for seasonal businesses to make the most of their high-income months while proactively managing their tax burdens.

Maximize Summer Income (from a Tax Perspective)

During your peak season, your primary tax focus should be on accurate reporting and staying ahead of your tax obligations:

1. Meticulous Income Tracking: Every sale, every service rendered, contributes to your business’s taxable income. Implement robust systems to meticulously track all income generated. This precision is fundamental for accurate tax reporting and avoiding discrepancies later.
2. Sales Tax Compliance: If your business sells goods or services subject to sales tax, ensure you are diligently collecting and remitting these taxes. High sales volume means increased sales tax collections, which must be correctly reported and paid to the relevant tax authorities.
3. Adjust Estimated Tax Payments: When your income surges during the summer, your overall tax liability for the year will likely increase. Proactively adjust your estimated tax payments upwards for the current tax quarter to avoid underpayment penalties. Waiting until the end of the year could result in a significant unexpected tax bill.

Minimize Tax Burdens (Year-Round Strategies for Seasonal Businesses)

Even during your busiest months, strategic tax moves can help reduce your overall tax burden:

1. Accelerate Deductions: Consider making deductible business purchases or payments before the end of the tax year or during your peak income period. For instance, if you plan to buy new equipment (like a commercial ice cream machine or a heavy-duty lawnmower), doing so can allow you to claim depreciation deductions that offset your taxable income.
2. Claim All Eligible Expenses: Keep detailed records of all business-related expenses. Common deductions for seasonal businesses can include:
   • Seasonal labor wages and associated payroll taxes.
   • Marketing and advertising costs incurred to attract summer customers.
   • Costs of seasonal inventory or supplies.
   • Maintenance and repair of equipment used heavily during peak months.
3. Review Payroll Tax Withholding: If you hire seasonal staff, ensure you are correctly withholding and remitting payroll taxes (Social Security, Medicare, federal unemployment, state unemployment). Proper handling of these employer and employee tax obligations is critical.
4. Explore Business-Specific Tax Credits: Research any tax credits relevant to your business or industry. For example, some states offer credits for certain types of seasonal employment or for energy-efficient upgrades to your business property.

 

Rob’s weekly tax tip – Timing of Income and Expenses

“Accelerating deductions or deferring income can have a large impact on your tax bill for the year.

If you had a great Q1 and Q2 in terms of sales and are thinking your profits will rise this year – and as a result, that your tax liability will also rise – it may be a good move to accelerate some of next year’s inventory purchases to this year.

Most businesses file taxes on a “cash basis” meaning expenses are deductible for taxes when they are actually paid in cash. Purchasing your next 2026’s Q1 inventory and then settling the invoice in cash in this 2025’s Q4, will allow you to offset the increase in profits from earlier this year.

This same principle applies to sales – though in the opposite direction. Again, if you had a great Q1 and Q2 this year, you may think about delaying sending invoices until early 2026 for Q4 sales. This will defer the cash payments to next year at a potential lower tax rate.”

— Rob Burgess, CPA

 

Preparing for Slower Seasons (Tax-Focused)

The quiet months are prime time for tax planning and review:

1. Project Taxable Income: Use your peak season data to project your overall annual taxable income. This helps in refining your remaining estimated tax payments.
2. Organize Tax Documents: Use the slower period to thoroughly organize all your income and expense records. This ensures everything is in order for year-end tax preparation.
3. Consult a Tax Professional: Engage with a tax professional during your off-season. They can help you review your year-to-date tax picture, identify overlooked deductions or credits, and plan for any significant purchases or changes before the tax year closes.

Strategic Tax Management for Seasonal Success

Operating a seasonal business presents unique tax challenges, but with proactive planning and diligent record-keeping, you can effectively manage your tax obligations throughout the year. By taking strategic steps during both busy and slow periods, you can optimize your tax position.

At Lightening the Load, we’re here to support your seasonal business with expert tax advice and personalized solutions. Let us help you navigate your unique tax cycle.

Let us lighten your load.

 

Acquiring a vacation home can be an exciting prospect, whether it’s for personal getaways, generating rental income, or as part of long-term planning. However, this significant step also brings specific tax considerations that you should understand from the outset.

At Lightening the Load, we’re here to guide individuals and couples through the tax landscape of property ownership. This blog post will clarify the tax impacts of owning a vacation property.

Tax Considerations for Your Vacation Property

The way your vacation property affects your taxes largely depends on how you use it. The Internal Revenue Service (IRS) has specific rules that distinguish between properties used solely for personal enjoyment, those primarily rented out, and those with mixed personal and rental use.

1. Primarily for Personal Use

If your vacation home is used mainly for personal enjoyment and rented out for less than 15 days during the tax year, here’s what you need to know:

• Rental Income: You are not required to report the rental income received.
• Deductions: You generally cannot deduct expenses related to the rental activity. However, you may still be able to deduct qualified mortgage interest and property taxes, similar to your primary home, subject to certain limitations on the total amount of mortgage debt.

 

Rob’s weekly tax tip – The “Augusta Rule”

“This tax-exempt rental income also applies where your business rents your primary residence from you.

Let’s say your LLC business is elected to be taxed as an S-Corporation, so you must file a separate Form 1120-S for the business tax return each year. On this tax return, you would record a rent expense of say, $21,000, reducing the taxable income from the business. The $21,000 is transferred to you, the owner, as rent for the use of your home for up to 14 days during the year. Since the period of use does not exceed 14 days, the $21,000 of rent income is exempt from taxes on your personal tax return.

Does this transaction hold any merit in the eyes of the IRS? How can you legitimately do this? If you own a business with primarily remote workers – maybe a consulting firm, financial planning firm, or another form of professional services – you can host a conference or business meeting at your primary residence. You could host multiple meetings during a year as long as the total days do not exceed 14. I would recommend keeping an agenda for the meeting(s) or recording meeting minutes for documentation purposes.”

— Rob Burgess, CPA

 

2. Primarily for Rental Use (Limited Personal Use)

If you rent out your property for 15 days or more, and your personal use is limited (generally not more than the greater of 14 days or 10% of the total days rented at fair rental value), the property is primarily considered a rental activity.

• Rental Income: All rental income must be reported on your tax return.
• Deductible Expenses: You can deduct a wide range of expenses related to the rental activity, including:
  • Mortgage interest (allocated to rental use)
  • Property taxes (allocated to rental use)
  • Insurance premiums
  • Utilities
  • Maintenance and repairs
  • Cleaning fees
  • Depreciation (a deduction that accounts for the wear and tear of the property over time)
• Rental Loss Limitations: If your deductible rental expenses exceed your rental income, you may be able to report a tax loss, which can offset other taxable income, subject to passive activity loss rules.

3. Mixed Personal and Rental Use

This is a common scenario for many vacation homeowners. If you rent out your property for 15 days or more and also use it for personal purposes beyond the limited threshold (more than 14 days or 10% of total rental days, whichever is greater), specific rules apply:

• Rental Income: All rental income must be reported.
• Allocating Expenses: You must allocate expenses between personal and rental use based on the number of days the property was used for each purpose. Only the portion related to rental use is deductible.
• Loss Limitation: A significant rule for mixed-use properties is that your deductible rental expenses cannot exceed your rental income. This means you generally cannot report a tax loss from the rental activity for tax purposes. Any disallowed expenses can often be carried forward to future tax years.

Tax Implications Upon Sale

When you eventually sell a vacation property, the tax impact will depend on how you used it:

• Capital Gains Tax: Any gain from the sale of the property will generally be subject to capital gains tax. The tax rate depends on how long you owned the property (short-term or long-term capital gains).
• Depreciation Recapture: If you claimed depreciation deductions while renting the property, a portion of your gain upon sale may be taxed at a higher “depreciation recapture” rate.
• Primary Residence Exclusion: To qualify for the tax exclusion on gains from the sale of a primary residence (up to $250,000 for single filers or $500,000 for married couples filing jointly), you generally must have owned and used the home as your main residence for at least two out of the five years before the sale. A vacation property typically doesn’t meet this condition unless you convert it to your primary home for the required period.

Navigating Your Vacation Property’s Tax Impact

Understanding the tax implications of a vacation property can be complex, especially with varying rules for personal use, rental use, and mixed use. Proactive tax planning is crucial to ensure you’re maximizing eligible deductions and correctly reporting income.

At Lightening the Load, we’re your steadfast partners on this tax journey, offering personalized advice tailored to your unique circumstances. Let us help you understand and manage the tax impact of your vacation property.

Let us lighten your load.

 

Summer can bring new energy and opportunities for your small business, and hiring teens or interns for seasonal support can be a smart move. Whether you need help with administrative tasks, a special project, or a surge in customer activity, bringing on young talent requires understanding specific tax responsibilities.

At Lightening the Load, we’re here to guide small business owners through all aspects of employment tax. This blog post will break down the essential tax knowledge for businesses considering summer youth employment.

 

Rob’s weekly tax tip – Paying your children through your business

“Hiring one of your own teenage children can be a great way to save on taxes while teaching them the responsibility of having an allowance – keep reading to learn how this works!

If you need an extra set of hands for some summer projects or just need someone to keep up with basic tasks in the business, hiring one of your kids – whether high school or college – can be a very tax efficient way to move income within the family.

If you pay your son or daughter $15,000 or less, all of their income gets wiped out by the standard deduction. You don’t need to show any actual expenses to claim this deduction on their tax return since everyone automatically receives it. Now, you have just removed $15,000 of taxable income, per employee-child, from your business and your tax return – likely at a much higher tax rate than your kids.

Further, the kids now have earned income which means they can contribute up to $7,000 per year to a Roth IRA. Earnings withdrawn from a Roth IRA in retirement are completely tax free. Also, earnings can be withdrawn tax free up to $10,000 for a 1^st time home purchase if the child has opened the account for at least 5 years. They can also withdraw from the Roth IRA to pay for college expenses – you have options!

For example, you hire your 16-year-old son to help you run your remodeling company, paying him $7,000 per year, so he can max out his yearly Roth IRA contribution. He works for you all through high school and college during the summer. Assuming they can earn around 6.5% per year on the contributions, they will have about $50,000 saved in the Roth IRA when they graduate from college. Since they’ve had the account for more than 5 years, they can use $50,000* as a down payment on a house – right after they graduate from college!”

— Rob Burgess, CPA

*The $50,000 consists of $8,000 earnings and $42,000 principal. Earnings are subject to the $10,000 limit; principal investment can always be withdrawn tax free.

 

Employee vs. Independent Contractor: A Crucial Tax Classification

Before extending an offer, accurately classifying your summer help is paramount. The IRS has specific rules to determine if someone is an employee or an independent contractor for tax purposes, primarily focusing on the level of control your business has over the work performed.

• Employee: If your business dictates what tasks are done, how they are executed, and where the workers are to report on a daily basis, the individual is likely an employee. This classification generally triggers payroll tax obligations for your business.
• Independent Contractor: If your business only controls the result of the work, and the individual controls how they achieve that result, they might be an independent contractor. Your tax responsibilities are significantly different in this scenario (e.g., issuing Form 1099-NEC if payments meet the threshold of $600).

Understanding Payroll Tax Responsibilities for Employees

If the teen or intern is classified as an employee, your business, as the employer, will have specific payroll tax obligations:

• Social Security and Medicare Taxes (FICA): Your business is generally responsible for withholding a portion of these taxes from the employee’s wages and paying a matching employer portion.
• Federal Unemployment Tax (FUTA): Your business may also need to pay federal unemployment tax, which contributes to state unemployment compensation funds. This is solely an employer-paid tax.
• State Unemployment Tax (SUTA): Most states also have their own unemployment tax, which businesses must pay.

Important Tax Forms to Handle for Employees

When hiring an employee, several tax forms are essential for your business:

• Form W-4, Employee’s Withholding Certificate: The employee completes this form to inform your business how much federal income tax to withhold from their pay.
• Form I-9, Employment Eligibility Verification: This form verifies the employee’s identity and eligibility to work in the U.S. (Crucial for all new hires, though not a tax form itself).
• Form W-2, Wage and Tax Statement: At the end of the year, your business must provide each employee with a Form W-2, reporting their total wages and taxes withheld. A copy is also sent to the Social Security Administration.

Special Tax Considerations When Hiring Minors

While general payroll tax rules apply to minors, there are specific exemptions that can affect your business’s tax liability:

• Exemptions from FICA Taxes: If your business is a sole proprietorship or a partnership where each partner is a parent, and you hire your own child under age 18, their wages may be exempt from Social Security and Medicare taxes.
• Federal Unemployment Tax (FUTA) Exemption: Wages paid to your child under age 21 for services performed in your business (again, if it’s a sole proprietorship or partnership where each partner is a parent) are exempt from FUTA.
• State Unemployment Tax: State unemployment tax exemptions for hiring minors (especially family members) vary, so it’s important to check your specific state’s rules.
• Income Tax Withholding: Generally, federal income tax must still be withheld from a minor’s wages based on their Form W-4.

Maintaining Accurate Records is Key

Proper record-keeping is vital for tax compliance. Your business should keep detailed records of:

• Employee wages paid
• Dates of employment
• Hours worked
• All taxes withheld and paid
• Completed Forms W-4 and I-9

These records are crucial for accurate tax reporting, verifying deductions, and in case of any review by tax authorities.

Streamline Your Summer Hiring Tax Tasks

Hiring teens or interns can be a great asset to your small business. Understanding and fulfilling your tax responsibilities as an employer from the outset is key to a smooth and compliant summer.

At Lightening the Load, we’re your steadfast partners, accompanying you through every tax season and helping you navigate complex tax matters. Let us help your business understand and manage the tax impact of your summer hiring.

Let us lighten your load.