Tax deductions that don't require itemizing
Friday, October 14, 2011
Most taxpayers every year claim the standard deduction.
But every tax-filing season, a lot of attention is paid to itemized deductions.
I'm as guilty as the next tax blogger of focusing on Schedule A. I apologize.
Timing aside: I also apologize for posting this so late, but I'm on a business trip and was booked solid today. Thank you for your patience and understanding.
For the 70 percent or so of filers who don't mess with Schedule A, this is a reminder that some deductions are available to you, too.
Technically, these are known as adjustments to income.
You'll find them in the Adjusted Gross Income section at the bottom of the long Form 1040 (lines 23 through 36), as well as a few of them also on the shorter Form 1040A (lines 16 through 19).
And technically, they are available to every taxpayer, regardless of whether you itemize or claim the standard deduction amount.
When Congress doesn't screw around, this group of write-offs tends to be the same from year to year.
When Congress is exceedingly slow in doing its job, the deductions and how to claim them can be a bit different.
This is because a few of them, such as the tax breaks for tuition and fees and out-of-pocket expenses by educators, are temporary and must be periodically renewed. That usually happens.
But sometimes the IRS has to finalize its forms before the deductions are officially continued, so then the agency has to issue special instructions on how to claim them.
Regardless of the form language tweaks, these tax breaks, sometimes called above the line deductions because they are listed above the last line on page one of the 1040 and 1040A, offer added tax savings to qualifying filers.
For filers still working on their 2010 returns, here's what can be claimed by Monday's filing deadline, listed in the order they appear on the 1040.
Line 23, Educator expenses: This is where teachers and other qualified school employees can write off up to $250 of unreimbursed personal money spent last year on classroom supplies. This is line 16 if you file a 1040A.
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 full-time 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. Form 1040A filers will find this deduction on line 17.
Line 33, Student loan interest: Write off up to $2,500 in interest on your school debt here. This write-off is on line 18 of the 1040A.
Line 34, Tuition and fees: If you can claim the tuition and fees tax break, you can enter up to $4,000 of those costs here. This also is on the shorter 1040A, line 19.
Line 35, Domestic production activities: This very specific line item is for taxpayers in the construction, farming or even some artistic fields (films and recordings). If you manufacture your product within the borders of the U.S. of A., this deduction could help at tax time.
This above the line deductions wrap up with Line 36, which says simply to add up the previous entries in this section. Before you do that, though, take a minute to read the 1040 instruction book. That's something you do every filing season, right?
In the instructions you'll find that this line is where you deduct a variety of specialized expenses, such as costs related to income from the rental of personal property, reforestation amortization and contributions to certain pension plans.
Some of these deductions do require you to fill out another form or worksheet, but if it can save you a few more tax dollars, isn't it worth the extra effort?
Final tax-filing tips: Did you miss any of the previously posted last-minute filing tips? You can find them at the special Countdown to Oct. 17, 2011, blog page.
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