Summer Jobs and Your Taxes

School’s out and it’s time to celebrate! Or go to work, depending on how you plan to spend most of the summer.

If you’re getting seasonal employment or plan on doing odd jobs like mowing lawns while school’s not in session, there’s a couple things you need to know about your taxes.

Even if you’re still a minor living at home, you may need have to file a tax return.

In most cases, your parents/guardian can claim you as a dependent up until you are 18, then 19-24 if you are a full-time student. If you earned income as someone ‘s dependent, you may still need to file a tax return and have slightly different rules that apply to you than someone who isn’t claimed as a dependent. An amount called an exemption applies to each taxpayer and dependent, and dependents can’t claim their own exemption. When computing taxes owed, the taxpayer who claims you as a dependent (usually a parent) also gets to claim your exemption.
For 2016, a tax return isn’t required if you are claimed as someone else’s dependent and you earned less than $6,300 for the year at a job.

However, even if you earned less than this amount during the summer you may still want to file a tax return anyway to have taxes taken out of your paychecks returned to you. If you are a college student who is insured under a marketplace health insurance policy in your name and not your parents’, you also will need to file a tax return to receive your premium tax credit even if you have no income.

If you are a minor, your parents/guardian can’t report your summer job earnings on their tax return.

Some states have laws that consider a minor’s income to belong to their parent or guardian. Despite this, you must file your own tax return if you have earned income like a summer job or side hustle. The only time your parents can put your income on their tax returns without you having to file anything is when that income is interest or dividends from savings and investments in your name.

Any income you earn on a 1099 or working for yourself is subject to self-employment tax.

Driving for Uber, Lyft, and so on is becoming a popular summer job option. Unlike seasonal employment, you are not considered an employee of these companies in most states and you will get a 1099 instead of a W-2. You need to keep track of not only how much you earn but also what you spend on deductible expenses such as mileage, supplies purchased, and maintaining your car. Regardless of if you hit the $6,300 threshold or not, a tax return is required if you netted $400 or more in self-employment income whether or not it was reported on a 1099.

If your parents claim you as a dependent, they get your tuition-related tax breaks.

Unless you are fully self-sufficient and not being claimed as a dependent, you don’t get any tax relief for having to pay tuition during the year if you are a college student.

Rue & Associates is here to help you and your parents get major tax savings for education and other crucial aspects of this phase of your life, and help you make informed tax decisions all the way from that first summer job to establishing a career. Call us today to speak to one of our friendly and professional tax law experts.