Summer means warmer temperatures, vacations, and special tax situations.
Wait. Tax situations? From teen summer jobs and W-4s to taxes on gig work and using summer camp costs for a child care credit, summer may come with special tax situations.
The South Carolina Department of Revenue (SCDOR) offers tax tips on some of the situations you may encounter this summer.
Teen Summer Jobs
The ranks of teens looking for and finding jobs swells nationwide by more than one million during the summer months, according to the U.S. Bureau of Labor Statistics. Teens working this summer should keep these tips in mind:
- One of the first things teens must do when hired is fill out a W-4 form so their employer can calculate how much in taxes should be taken out of paychecks. Many, if not most, will owe no tax. Even if teens are exempt from withholding, they can still expect to see deductions from paychecks for Social Security and Medicare, according to the IRS.
- Many teens find jobs in the food industry or do odd jobs. Tip income and self-employment, sometimes called gig work, are taxable and should be recorded and included on teens' tax returns next year.
- If a teen receives pay for Reserve Officers' Training Corps (ROTC) summer activities, that pay also is taxable, the IRS notes.
Because of the weather and the nature of some industries, such as tourism, summer can offer seasonal employment, meaning jobs that may exist on a temporary basis. Some workers may decide to do a part-time job or offer services on the side from their regular job during the summer. Whatever the circumstances, remember these tips for seasonal work:
- Whether workers receive most of their money in tips, cash, from employers, or are self-employment, all of their income is taxable and should be reported on tax returns.
- Keep good records of business expenses and income if summer income is from self-employment.
- Deductions can lower a tax bill, but they must be supported by records. Double check the rules for deducting expenses related to use of things like a personal car or house. Read our tips for gig workers for more information.
In cases where mom and dad work or are looking for work, summer day camp also may offer a tax break for parents in the form of the federal Child and Dependent Care Tax Credit.
- According to the IRS, parents can claim up to 35% of child care expenses, with a limit of $3,000 for one child or $6,000 for two or more, and those expenses can include the cost of childcare at a day camp.
- South Carolina residents can also claim the Child and Dependent Care Credit on their SC1040 equal to 7% of the child care expenses allowed for the federal credit.
- The name, address and taxpayer identification number of all care providers must be included on any tax return claiming the credit. The childcare provider cannot be the taxpayer's spouse, dependent, or the child's parent.
For more information about South Carolina Individual Income Tax or tax credits, visit the SCDOR at dor.sc.gov/IIT.
Connect with the SCDOR on Facebook and Twitter to stay up-to-date with the latest news and tax tips.