Remember the excitement of the last day of the school year as a child? Many adults have fond childhood memories of being done with school for the summer. But summer break isn’t just for kids. Here are nine potential summertime tax breaks for grown-ups — including many that allow individuals and small business owners to combine tax savings with summertime fun.

1. Dine on the Company’s Dime

Generally, under long-standing tax rules, you can deduct 50% of the cost of qualified business meals. But the Consolidated Appropriations Act (CAA) carves out a special temporary exception. It allows a 100% deduction for beverages and food provided by a restaurant in 2021 and 2022. This includes both take-out fare and eat-in.

Take advantage of this unique tax break this summer. Keep in mind that the cost of tickets to attend a ballgame with clients is no longer deductible as business entertainment, but you can write off 100% of the cost of beverages and food consumed there if they are invoiced separately. 

2. Map Out Business Trips

Travel is heating up after slumping during the pandemic. If the primary purpose of a trip is business, you can write off your travel expenses, even if you do some vacationing while you are away.

For example, if you fly cross-country and spend the workweek in meetings and enjoy weekend sightseeing, the entire cost of your airfare, plus lodging, business meals, and local transportation, is deductible within the usual tax law limits. But you can not write off any personal expenses.  

Furthermore, if your family accompanies you on the business trip, their expenses are not deductible. But you can write off what it would have cost you to travel alone. For instance, if you pay $250 per night for a hotel room and a single room costs $200, you can deduct $200 per night.

3. Send the Kids to Day Camp

Parents who work full-time often send young children to summer camp while school is out for the summer. Assuming your certain requirements are met, the cost qualifies for a dependent care credit. For 2022, the maximum credit for moderate-to-high income taxpayers is $600 for one child and $1,200 for two or more kids.

This tax break is only available for day camps, including specialty camps for the arts or athletics. An overnight camp does not qualify. 

  

Important: COVID-19 relief legislation enhanced the dependent care credit, but those changes expired after 2021. There is a chance that the enhancements could be retroactively extended by Congress.

4. Sweep Up Charitable Deductions

If you spend some downtime this summer cleaning out the basement, garage, or attic, you will likely find some household goods — such as furniture or used clothing — that you don’t want or need anymore. Instead of discarding these items, consider donating them to charity. Assuming they are still in good condition, you will be eligible for a charitable deduction based on their current fair market value.

However, charitable deductions are only available to people who itemize. If you expect to claim the standard deduction in 2022 (rather than itemizing), you will help the charity — but you won’t get any tax breaks.

5. Go Green

The 10% tax credit for installing energy-saving home improvements — such as installing an ENERGY STAR central air conditioning system or certified water heating — technically expired after 2021. (Although it’s possible that Congress could revive the credit again.)

However, you may still benefit from an alternative credit for renewable energy resources. The list of qualified expenses includes:

  • Wind turbines,
  • Solar panels and solar-powered water heaters,
  • Fuel cells rely on renewable resources (for example, hydrogen), and 
  • Geothermal heat pumps.

This credit, which is gradually being phased out under current law, equals 26% of qualified expenses incurred in the 2022 year. It’s scheduled to drop to 22% for 2023 and then expire in 2024.

6. Jump Aboard an RV or Boat

The outdoor craze spurred by the COVID-19 pandemic has brought boat and recreational vehicle (RV) sales to record levels. If you are currently shopping for a boat or RV for personal use, be aware that people who itemize can deduct annual state sale taxes paid during the year in lieu of their local and state income taxes.

Important: If you choose to deduct sale taxes based on the optional IRS table, instead of keeping track of all your actual expenses, you may write off the sales tax for certain high-cost items — including boats, RVs, and vehicles — in addition to the table amount.

As a bonus, a boat or RV can qualify as a personal residence if it has a toilet, sleeping, and cooking facilities. In this case, you may be able to deduct mortgage interest on the property within the usual limits.

7. Track Vacation Home Use

Your vacation home is classified as a personal residence if:

  • Personal use during the year exceeds the greater of 1) 14 days or 2) 10% of the days you rent the home out at fair market rates, and
  • You rent it out for less than 14 days during the course of the year.

Personal use generally means use by the owner, certain family members of the owner, and any other party who pays less than fair market rental rates. When calculating personal use, disregard days of vacancy and days spent mainly on maintenance and repair activities. So, if you spend a couple of days cleaning up the place, it won’t count against you, even if the rest of the family is enjoying the great outdoors at the same time. 

The tax law allows you to deduct vacation home rental expenses to offset the rental income you receive. With summer approaching, you may have worked out a rental schedule, but know that you can’t deduct a loss if your personal use of the home exceeds the greater of 14 days or 10% of the time the house is rented out. To avoid this pitfall, ensure that your personal use remains below these limits.

8. Rent Out Your Personal Residence

Do you live in an area where an event — such as a music festival or golf tournament is held? If so, consider moving out while the event is happening and renting your home to attendees. If you rent out your house for no more than two weeks, you don’t have to comply with the tax rules.

That means you are not taxed on the rental income; it is completely exempt from federal income tax. But you also can not deduct rental-based expenses either. You might use the extra income to splurge on your own vacation while the event takes place — or you can spend it on repairs or upgrades to your home that you have been postponing.

9. Harvest Capital Gains or Losses

Midyear is a good time to review your investments. If you have already incurred capital losses from securities transactions, any gains you realize between now and the end of the year may be absorbed by those losses.

Conversely, if you realized capital gains earlier in the year, the losses you “harvest” during the summer can offset those gains, plus up to $3,000 of ordinary income in 2022. Any excess loss is carried over indefinitely.

If you show a net long-term gain for 2022, the maximum tax rate for most taxpayers is 15% (20% for certain high-income taxpayers). Plus, if you are an upper-income investor, you may be liable for a 3.8% net investment income tax (NIIT) on top of your regular capital gains tax. However, those in the lowest tax brackets — like your children — may benefit from a 0% tax rate on long-term capital gains. 

For More Ideas

These are just a few possibilities to consider. With the proper planning, you can bask in the sun and tax-saving opportunities all summer long.