Summer is a time for R&R, but also offers tax-saving opportunities for individuals and small business owners. Here are seven ways to reduce tax liability this summer.

  1. Host an employee gathering. Prior to 2018, your business could deduct 50% of the cost of qualified business entertainment expenses. But this deduction has generally been eliminated. Key exception: If you hold a summer barbecue or similar employee outing, you can write off 100% of the event’s cost if the entire workforce is invited.
  2. Harvest securities sales. The maximum tax rate for long-term capital gains from securities sales remains at 15% (20% for certain high-income taxpayers). When appropriate, realize capital gains to benefit from this special tax treatment. Conversely, if it suits your purposes, you might harvest capital losses this summer instead. Capital losses offset capital gains plus up to $3,000 of ordinary income. Any remaining loss will be carried over to next year.
  3. Sweep up charitable deductions. Generally, itemizers can deduct the fair market value (FMV) of property donated to a qualified charitable organization if they owned it longer than one year. For example, if you decide to clean out your basement, attic or garage during the warm weather, you might give used clothing and furniture in good condition to charity and then claim a deduction on your 2022 return.
  4. Hire targeted workers. If your short-staffed business hires workers from one of several disadvantaged “targeted groups,” it may qualify for the Work Opportunity Tax Credit (WOTC). Generally, the maximum WOTC is $2,400 per qualified worker. Also, there is a special summertime credit for hiring youths in certain areas. The maximum for the summertime credit is $1,200 per qualified worker.
  5. Take a trip. If you travel away from home on business, you may deduct your business-related expenses—including airfare, lodging and qualified business meals—as long as the primary purpose of the trip is business-related. But the number of days spent on business versus pleasure is critical, so monitor the time spent on activities. Note: The usual 50% limit on meal deductions is increased to 100% in 2022 for restaurant-provided food and beverages.
  6. Donate a conservation easement. Do you own scenic property in a rural area? Instead of selling it to real estate developers, you might donate a “conservation easement” to a qualified charitable organization. The easement generally allows others to enjoy the views or preserve wildlife. As long as certain tax law requirements are met, you can currently deduct the value of this donated benefit.
  7. Sidestep a tax penalty. The tax law requires you to pay income tax through withholding and/or installment payments during the year. The next quarterly installment due date is September 15. To avoid an “estimated tax penalty” for 2022, ensure that you pay at least 90% of your current tax liability or 100% of the prior year’s tax liability (110% if your AGI exceeded $150,000).

These are just seven possibilities to consider this summer. Schedule a mid-year meeting with your JMF tax advisor to discuss whether any of these ideas, or others, apply to your situation.