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Tax breaks without itemizing

The hubby and I itemize our tax deductions. We are in the tax-filing minority.  

Most taxpayers claim the standard deduction. The good news for these folks is that there are several possible tax write-offs right on Form 1040 and a few on the 1040A, too.

Plus, over the last few years, standard deduction filers have been able to add some extra amounts directly to their standard claim.

2009 standard deductions: First, a quick review. To see whether you should itemize or take the standard deduction, you need to know what the standard figures are.

Here are the 2009 numbers:

  • $5,700 for single filers or married couples who send in separate returns;
  • $8,350 for heads of households; and
  • $11,400 for couples who are married and file jointly.

If you can't come up with enough eligible expenses to top the standard amount for your filing status, then you can't itemize.

Well, technically, you can, but why would you when the standard deduction is more? But I digress.

Adjustments to income: Now for the fun part. At the bottom of the 1040's first page there's a section called Adjusted Gross Income. On the 2009 return, it's lines 23 through 37.

Above the line deductions 2009

Lines 23 through 36 offer you various ways to reduce your gross, AKA total, income so that you'll have less money for the IRS to tax over on page 2. This section is part of that first income reduction step: arriving at your adjusted gross income, or AGI.

After taking these adjustments, your AGI is entered on the last line of the form's first page; that's line 37 on the 2009 return. That's why the lines preceding it that you use to get to your AGI are popularly known as above-the-line deductions.

They include widely publicized breaks such as the $250 in educator expenses, many costs of moving, tuition and fees for higher education, traditional IRA contribution deductions, student loan interest and several other write-offs for the self-employed.

Also in this group are some very specific ways to trim your income, including subtracting  alimony payments, business expenses for certain professions and the costs of domestic production activities.

A few more adjustments are available but didn't make it onto the form because of space limitations. These include some more esoteric tax breaks -- reforestation amortization and court costs for certain unlawful discrimination cases, to name a couple -- but check them out to see whether they apply to you.

These amounts are added to the total of the other lines that you put on line 36.

Available for all: One other thing to note here. These income adjustments also can be used by filers who do itemize. But obviously they are especially valuable for folks who haven't been collecting deductible expense receipts all year.

Also, I've focused on the 1040, but as I mentioned earlier, a handful of nonitemizing breaks also are found on the 1040A. They are educator expenses, IRA contributions, student loan interest and tuition and fees.

So if you can use that shorter form, be sure to look for these above-the-line deductions on its first page.

My previous post, Deductions for nonitemizers, elaborates on these, although you'll notice that the order is a bit different. When that was posted back in 2007, the IRS was having to work around some Congressional changes to tax laws that came after the forms were printed.

For this filing season, my tax tip Cut your taxes without itemizing has the 2009 return specifics.  

Don't forget Schedule L: Finally, for this year's filings, we also have the new Schedule L.

Nonitemizers use this form to add the sales tax paid on a new vehicle bought last year, along with some property tax payments on a primary residence.

These added expenses could really bulk up your standard claim.

And thanks to the Schedule L and the above-the-line deductions, folks who don't itemize are getting a whole lot of nice write-offs nowadays, too.

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Chandler CPA

Non-itemizers need to remember the real estate tax deduction and the new car sales tax deduction. These are a couple that are often overlooked.

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