The tax reform law enacted back in 2017 did fulfill one of its promises. It made filing easier for millions, mainly folks who no longer itemize deductions because the standard claim amounts are so much larger.
But some of the associated tax return mechanics also could mean some taxpayers might miss some tax breaks.
Tax law and form changes: When the Tax Cuts and Jobs Act became law, the Internal Revenue Service also revised tax return forms. Most notably, it dramatically shrank Form 1040, beginning with the 2018 version.
It wasn't quite the postcard-sized tax return long touted by Republicans who pushed through the biggest tax reform bill since the 1986 Internal Revenue Code rewrite, but the form was smaller.
To get to that reduced size, though, much of the information that previously went on the longer Form 1040 was moved to a series of schedules. That included the xx tax write-offs, dubbed above-the-line deductions when they were listed on page 1 of the old Form 1040 (and 1040A), just above the line where you enter your adjusted gross income (AGI).
Now you'll find them on Schedule 1.
Sure, tax software and tax preparers help ensure that filers don't miss these tax breaks. But since they're not so easily in sight on Form 1040, even on the current 2022 version which has grown to near the pre-reform law size, they could be out of mind at filing time.
So that you don't miss them, and are prepared when your tax adviser or software asks, here's a quick overview of these above-the-line deductions — Yes, they're still called that since the Schedule 1 info gets entered on Form 1040 to get to your AGI. — that don't require itemizing.
Official adjustments name on schedule: Their above-the-line moniker notwithstanding, these deductions officially are known as adjustments to income. They're enumerated in Part II of Schedule 1, which is on the reverse, page 2 side of the schedule.
Below are the first 23 lines of this section.
Educator expenses (line 11): Eligible educators (more on this in a minute) can deduct some qualified unreimbursed classroom expenses paid out-of-pocket. The amount is adjusted annually for inflation, and on 2022 returns is worth $300 per eligible educator. If you and your spouse are filing jointly and both of you were eligible, the maximum deduction is $600. However, neither spouse can deduct more than $300 of his or her qualified expenses here.
Most educators find they spend more than the $300 (or $600 joint filer) limit. But every expenditure helps. So if you're 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 — don't miss out on this deduction. One other note: home school parents 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 2022, those miles from January through June can be counted at 58.5 cents per mile, and at 62.5 cents per mile for last July through December. You also can count 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 27 at the end of 2022, 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 88).
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 changed, you still owe Uncle Sam. 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 91 and 92 of the Form 1040'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 93) 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): In prior tax year versions, this line was the tuition and fees adjustment. However, lawmakers decided to eliminate this deduction (as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020) and make up for it by making the Lifetime Learning Credit available to more individuals. The exchange actually is a better deal, as a tax credit if more valuable than a deduction because a credit directly reduces tax liability dollar-for-dollar. If another adjustment is approved for future filings, it will be slotted here.
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 the 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! Line 24 offers a dozen more changes to reduce your income as, what else, other adjustments to income.
As shown in the pictured bottom half of Part II, are these various write-offs, with a bit of explanation following the image (in case you're reading this on a small mobile device).
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 8l (that's 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 8m (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).
Finally, skipping from 24k to the end of the alphabet (leaving room for possible future items on the schedule), we get the 12th possible write-off, the always popular catchall of other adjustments found on line 24z. Here you report any adjustments not entered elsewhere. An example the IRS gives in the 1040 instructions as to what might go on 24z is an unreported loss on the sale of a personal item not detailed on Form 8949.
Yeah, that final line 24 item underscores that most of these other additional costs that you can claim are arcane and probably won't apply to most of us.
For itemizers, too: While these tax deductions are particularly appealing to taxpayers who don't itemize, they aren't limited to standard deduction filers. They can be claimed by all who qualify, including the minority of taxpayers who still fill out Schedule A.
So regardless of which deduction method you use, check them out.
Even if these Schedule 1 items require a bit more tax calculating and force you to fill out another form or two, the added work could cut your tax bill. And that's the ultimate goal of all taxpayers every filing season.
You also might find these items of interest:
- What's new when it comes to filing your 2022 taxes
- Reporting Super Bowl and other gambling winnings on IRS Schedule 1
- Answers to these filing checklist questions could make a big tax difference