No itemizing needed to claim these 25 tax deductions
Monday, March 14, 2022
Since the Tax Cuts and Jobs Act (TCJA) of 2017 nearly doubled the standard deduction amounts, even more people have chosen to use that filing method. IRS data indicate that close to 90 percent of us have opted not to mess with itemizing.
But dumping the Schedule A doesn't mean you give up all deductions.
On tax year 2021 returns, you can claim some of your cash charitable deductions directly on Form 1040.
And if you take a look at Schedule 1, one of the documents that the Internal Revenue Service created to accompany Form 1040 when the TCJA took effect, you'll find even more deductions.
Adjustments add up then take down income: Technically, these write-offs are adjustments to income. They've been around for ages and used to be on the old long Form 1040 — with a few on the old 1040A, too — just before the last line of the form's first page. That last line was where you entered your adjusted gross income (AGI). That led to their collective name in the tax world as above-the-line deductions.
They were, and still are, used to reduce your total, or gross income, to you lower AGI. But the AGI line has moved; it's now in the middle for Form 1040. So has where you enter these above-the-line
They still do that. And they are still entered before the AGI line on Form 1040. But the AGI line is in the middle of the form. And the above-the-line deductions now are details on Form 1040's Schedule 1.
And they still work the same way. They reduce your total taxable income to a lower AGI amount. Generally, the lower your AGI, the lower your tax bill, sometimes by hundreds, perhaps even thousands, of dollars.
Plus, a lower AGI also could qualify you for some income-determined deductions or, even better, tax credits, which reduce your tax bill dollar for dollar.
Even better, despite the change in tax form locations, these deductions/income adjustments still can be claimed by all eligible taxpayers, regardless of whether they itemize or take the standard deduction.
Below is the top half of page 2 of Schedule 1. It's where Part II, Adjustments to Income, start. And below that image is a look at each of these first 13 lines.
Educator expenses (line 11): Eligible educators (more on this in a minute) can deduct some qualified unreimbursed classroom expenses paid out-of-pocket. The base amount is $250 for a single teacher. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses here.
That $250/$500 amount also is adjusted annually for inflation. This recent inflation burst came too late for 2021 taxes. It remains at the $250 single, $500 married levels on current returns, but for planning purpose will be bumped up a bit for 2022.
Most educators find they spend more than the $250 (or $500 joint filer) limit. But if you don't, double check your receipts for any coronavirus pandemic prompted classroom purchases. The IRS decreed last year that certain COVID-19 protective items purchased for classroom use count toward this no-itemizing-needed deduction.
As for who is an eligible educator, the IRS says this includes kindergarten through grade 12 teachers, instructors, counselors, principals or aides who worked in a school for at least 900 hours during a school year. Home schoolers, however, don't qualify for this deduction.
Certain business expenses (line 12): Don't get too excited thinking this might help reduce your business tax bill. Schedule 1 notes that these write-offs are limited to folks in special job categories, specifically military reservists, performing artists and fee-basis government officials. Also, reserve military personnel can only use this for costs incurred when they travel more than 100 miles from home to perform services as a National Guard or other armed forces reserve member. If you drove to these duties in 2021, those miles can be counted at 56 cents per mile, plus what you paid for parking, fees and tolls. All taxpayers who take this deduction also will need to fill out Form 2106.
Health savings account deduction (line 13): Here you can write off your contributions to one of these medical coverage plans, commonly referred to as HSAs. However, you'll need more paperwork here, too. You must also file Form 8889.
Moving expenses for members of the Armed Forces (line 14): Folks who've claimed this tax break in the past probably noticed the added reference on this line's description. It previously was shown only as moving expenses. But the TCJA changed that. Now relocation costs are limited to military personnel who are on active duty and who move pursuant to a military order related to a permanent change of station. These relocating U.S. Armed forces members also will have to fill out Form 3903 to detail their eligible costs, the total of which go here.
Self-employment tax (line 15): 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. You'll have to include your Schedule SE, too.
Self-employed SEP, SIMPLE, and qualified plans (line 16): Staying in the be-your-own-boss vein, if you were able to contribute to a qualified self-employment retirement plan, note that amount here.
Self-employed health insurance deduction (line 17): One more break for the independent worker. If you paid for your own medical policy, those premiums are fully deductible here. The insurance also can cover your child who was as old as 26 at the end of 2021, even if your son or daughter wasn't your dependent. If you don't use a tax pro or tax software, there's a worksheet for the self-employed insurance deduction in the Form 1040 Schedule 1 instructions (page 89).
Penalty on early withdrawal of savings (line 18): If you had to cash in a CD or other savings account and paid a price for getting your money from your bank, you can write off that fee here. You should have received a Form 1099-INT or Form 1099-OID detailing the early-withdrawal penalty amount.
Alimony paid (line 19): The TCJA also changed the tax treatment of alimony for ex-spouses who pay and receive this money. But its changes don't affect divorces that were granted before the tax law took effect. Those distinctions affect the entries on this three-part line.
Under the TCJA, the deduction for alimony payments — the amount entered on line 19a — will remain in effect for folks with divorce agreements finalized by a court and/or a formal divorce decree issued before the end of 2018. That's why the date you enter on line 19c is so important.
As for the former spouse getting alimony, if your marital status change was on or after the TCJA's Jan. 1, 2019, effective date, then you don't owe tax on the spousal payments you get. If, however, it was before the law change, you still owe. That's why line 19b wants your Social Security number, so the IRS can double check that you report it as income.
IRA deduction (line 20): If you have a traditional IRA, you might be able to deduct some or all of your contribution. This Schedule 1 deduction depends on many variables, such as income and workplace retirement plans, both for you and, if you're married and file jointly, your spouse. Again, there's a worksheet on pages 92 and 93 of the form's instructions.
Student loan interest deduction (line 21): You can write off up to $2,500 in interest on your school debt here. Yes, there's yet another worksheet (page 94) to make sure you qualify — there are AGI determined earning limits — and figure how much you can enter on this line.
Reserved for future use (line 22): Last year, his was the tuition and fees deduction. It also was an extender, the name given to the packed of tax laws that technically are temporary and must be renewed periodically by Congress. Lawmakers decided as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 to repealed the tuition and fees deduction in 2021 in exchange for increased income limitations for the Lifetime Learning Credit. That's actually a better deal, as a tax credit directly reduces your tax liability.
Archer MSA deduction (line 23): An Archer MSA, for medical savings account, was available only to certain self-employed people and small businesses. I say was because Archer MSA program expired on Dec. 31, 2007. No new accounts were allowed after that date, but Archer MSAs established before then can continue to be used and receive contributions. The contributions can be claimed here, along with the filing of Form 8853.
But wait, there's more! If you filed Schedule 1 in previous years (OK, since the 2017 tax reform law and the schedule was created), you might remember that the earlier versions told taxpayers to add the earlier above-the-line deductions and enter the amounts on the form.
But it should have also told taxpayers to check the Schedule 1 instructions. By doing so, they would have found even more above-the-line deduction possibilities.
Since so many people apparently failed to check — who knew, other than faithful readers of the ol' blog? — for the additional deductions, the IRS decided on the 2021 version to list the added dozen as Other adjustments on line 24 of Schedule 1.
Here they are, in the image of the second half of the above-the-line deductions, and with a bit of explanation.
The 12 additional income adjustments as alphabetic sublines of line 24 are:
- Jury duty pay if you gave the pay to your employer because your employer paid your salary while you served on the jury.
- Deductible expenses related to income reported on line 8k (in Part 1 of Schedule 1's Additional Income section) from the rental of personal property engaged in for profit.
- Nontaxable amount of the value of Olympic and Paralympic medals and USOC prize money reported on line 8l (again, in Part 1's Additional Income section).
- Reforestation amortization and expenses (see IRS Publication 535).
- Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see IRS Publication 525).
- Contributions to section 501(c)(18)(D) pension plans (see IRS Publication 525).
- Contributions by certain chaplains to section 403(b) plans (see IRS Publication 517).
- Attorney fees and court costs for actions involving certain unlawful discrimination claims, but only to the extent of gross income from such actions (see IRS Publication 525).
- Attorney fees and court costs paid in connection with an award from the IRS for information you provided that helped the IRS detect tax law violations, up to the amount of the award includible in your gross income.
- Housing deduction from Form 2555.
- Excess deductions of section 67(e) expenses from Schedule K-1 (Form 1041), box 11, code A. See the Instructions for Schedule K-1 (Form 1041).
And skipping from k to the end of the alphabet (leaving room for possible future items on the schedule), we get the always popular catchall line: z. Other adjustments. Here you report any adjustments not reported elsewhere. List the type and amount of the adjustment.
Yes, most of these additional 12 costs that you can claim are arcane and probably won't apply to you. But these potential write-offs can add to your Schedule 1 adjustments/deductions total.
You should give them at least a cursory look and if you are one of the few filers who can claim them, take tax advantage when you file this year.
Even if they require you do a bit more tax calculating and force you to fill out another form or two, the added work could cut your tax bill. That is, after all, the ultimate goal of all taxpayers every filing season.
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