Don't itemize? Don't worry. You still have plenty of deduction options
Friday, October 12, 2012
Do you sometimes feel left out when folks talk about tax breaks. Schedule A gets so much attention and you've never filed it.
Don't despair. You are actually in the majority. Internal Revenue Service data reveals that around two-thirds of tax returns claim the standard deduction amount each year.
And the tax code has something for all y'all standard deduction filers.
They're known officially as adjustments to income.
But they're popularly called above-the-line deductions because you claim them in the "Adjusted gross income" section found at the bottom of the first page of both Form 1040 and Form 1040A, just above the forms' last line on that page.
And they are today's Countdown to Oct. 15 tax tip.
Just like the standard or itemized deductions you claim later on the tax form, these items help reduce your total, or gross, income to get to your adjusted gross income, or AGI.
And these adjustments, or above-the-line deductions, can be claimed regardless of which deduction method you use. If you claim the standard, you still get to put that amount on the second page of your your 1040 or 1040A. And if you itemize, you go ahead and fill out Schedule A and put that total on your 1040.
The above-the-line deductions are essentially bonus tax breaks.
The bulk of them are found on the long Form 1040. They include, to name a few, such popular items as educator expenses (that $250 for teacher and certain other school employees out-of-pocket classroom costs), student loan interest paid (up to $2,500), higher education tuition and fees (a possible $4,000 tax break), alimony paid and a deduction for traditional IRA contributions as well as for self-employment retirement plan contributions.
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There also are some even more specific tax breaks in this collection: certain business expenses for special job categories (military reservists, performing artists and fee-basis government officials), health savings accounts contributions, penalties for early savings withdrawals, domestic production activity costs and a couple of deductions -- self-employment tax and health insurance premiums paid -- for self-employed workers.
But wait, there's more!
On line 36 you can include what the IRS calls write-in adjustments. These even more esoteric deductions -- reforestation amortization anyone? -- are detailed in Form 1040's instructions (page 33).
Four of the above-the-line deductions also are found on Form 1040A.
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On this slightly shorter tax return you can deduct educator expenses, traditional IRA contributions, student loan interest and tuition and fees.
You will have to fill out some worksheets and possible another form if you can claim some of these adjustments to income. But don't let that discourage you. These above-the-line deductions could really be worth it.You also might find these items of interest:
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