And because so much attention is paid during tax season to ways to cut your IRS bill by itemizing, you also might have this nagging little feeling that you're being cheated out of tax breaks.
But what are you to do if you rent and have no mortgage interest or property taxes to write off? Your state income tax or sales tax amount, even when added to your charitable donations, might not be enough to exceed your allowable standard deduction. That's $5,000 for single filers, twice that for married taxpayers filing jointly or $7,300 if you're head of household.
You're stuck, right?
If you've never filed the long form 1040, now might be a good time to take a look at it. At the bottom of the first page you'll see a section labeled "Adjusted Gross Income."
Those lines, #23 through #36, offer many taxpayers a way to shave a bit off their adjusted gross income (AGI), which in turn will help reduce their taxable income amount and eventually, in most cases, their tax bills.
These write-offs are popularly known as above-the-line deductions because they are above the last line on the 1040's first page, the line where you enter your AGI. They cover such things as education-related costs (for teachers as well as students), retirement and health plan contributions and moving expenses.
Even alimony payments you made to the ex can help here, as can your commitment to the environment you exhibited last year when you bought that Prius hybrid.
These tax breaks are available to every eligible taxpayer, even those who itemize. But they are especially welcome by filers who don't use Schedule A, since these above-the-line options represent a sort of side-door into the tax deduction room that you previously have felt locked out of.
TODAY'S TAX TIP offers a quick look at these breaks in the order they appear on the 1040:
Line 23, Educator expenses: Teachers and other school employees can write off up to $250 they spent last year on classroom supplies.
Line 24, Certain business expenses: This applies to special job categories -- military reservists, performing artists and fee-basis government officials. For other workers, Schedule A (with its 2 percent threshold) is still required.
Line 25, Health savings accounts: This is where you can write off your contributions to one of these medical coverage plans, commonly referred to as HSAs.
Line 26, Moving expenses: Under certain circumstances, many of your relocation costs can be deducted from your gross income here.
Line 27, Self-employment tax: If you worked for yourself, either fulltime or as a side job to bring in some extra spending money, you likely had to pay self-employment tax. Half of that amount can be subtracted here.
Line 28, Self-employment retirement plans: Staying in the be-your-own-boss vein, if you were able to contribute to a retirement plan (e.g., SEP-IRA or Keogh), note that amount here.
Line 29, Self-employment health insurance: One more break for the independent worker. If you paid for your own medical policy, those premiums are fully deductible here.
Line 30, Early savings withdrawal penalties: If you had to cash in a CD and paid the price at your bank, you now can write off that fee.
Line 31, Alimony: This is for the paying ex-spouse, not the recipient. You can deduct this support money -- but not any funds you paid to take care of your kids.
Line 32, IRA contribution: If you have a traditional IRA, you might be able to deduct some or all of your contribution. This is the place to do so.
Line 33, Student loan interest: Write off up to $2,500 in interest on your school debt here.
Line 34, Tuition and fees: Another tax break for other higher education costs goes here, up to four grand for some taxpayers.
Line 35, Domestic production activities: Yeah, most of us will say "what?" when we get to this line. But for filers in the construction, farming or even some artistic fields (films and recordings), this deduction could help at tax time.
Line 36: It says simply to add up the previous lines. But if you
read the 1040 instruction book, and you do faithfully read all the tax
form directions, don't you? ;-), you'll find this is where you can
claim a deduction for a clean-fuel car you bought last year.
You can get more details about these deductions in this story I did for Bankrate.com.
About Taxes also has a nice rundown on them here.
Or if you're really brave (or need some reading to cure your insomnia),
you can check out the official language on adjustments to income at
this IRS Web page.
Some of you might not even need the long 1040. A few of these
deductions -- student loan interest, educators expenses, IRA
contributions and tuition and fees -- are also found on lines 16
through 19 of the slightly shorter 1040A.
When you're through taking all these nonitemized deductions, you get to claim your standard deduction amount on the back of the 1040 or 1040A.
So take a minute to look over these breaks and see if any apply to you. If they do, file the appropriate form and be sure to claim them. You might have to fill out an added worksheet or attach another form or two, but the result could make a nice difference in your tax bill.