A Chance to Cut Taxes Without Itemizing
Taxes are always a bit of a conundrum to me. I always assume if I were smarter I’d pay less. Well, here is a chance for both of us to do just that. Let me share some excerpts from a story about things that can be subtracted from a person Gross Adjusted Income. I found a few surprises.
Kay Bell of Bankrate.com wrote:
“What do teachers, divorcees and people paying off student loans have in common? They can cut taxes, without itemizing. These filers, along with other taxpayers who fit into special categories, might be able to claim at least one of the dozen-plus deductions found directly on Form 1040 without hassling with Schedule A. Taxpayers who file Form 1040A can claim a few of these tax deductions on that shorter form, too.”
Remember, these are adjustments, not deductions
Officially, these breaks are identified as adjustments to your income. But they are popularly referred to as above-the-line deductions because you subtract them on Page 1 of your Form 1040 or Form 1040A, just above each form’s last line where you enter your adjusted gross income, or AGI.
The abbreviated list below, comes in the order in which they appear on lines 23 through 36 of Form 1040, are the current above-the-line deductions.
1. Educator expenses. With the educators’ expenses deduction, teachers and other public and private school system employees can subtract up to $250 they spent on classroom supplies.
2. Certain business expenses. Unreimbursed business expenses also appear on Schedule A as a miscellaneous deduction. The special taxpayers who qualify for this adjustment are military reservists, performing artists and fee-basis government officials.
3. Health savings account deduction. A health savings account, or HSA, is a medical coverage plan that works much like an individual retirement account
4. Moving expenses. If you relocated for job reasons,
5. Self-employment tax. If you’re self-employed, you have to pay Social Security and Medicare taxes — the amount collected from you as an employee and you as an employer. But you get to deduct half of those payments on line 27.
6. Self-employed retirement plans. If you have a self-employment pension plan, such as a Keogh or a Simplified Employee Pension plan (SEP IRA), deduct any contribution amounts on line 28.
7. Self-employed health insurance. As an entrepreneur, you now can deduct 100 percent of health insurance premiums you paid for yourself, your spouse and dependents. Don’t forget to count what you paid toward long-term care policies. You get a partial break here, too. Enter the amount on line 29.
8. Penalty on early withdrawal of savings. The IRS lets you subtract that charge from your income.
9. Alimony paid. Divorced filers get a chance to recoup alimony payments on line 31. Be sure to include the Social Security number of your ex-spouse, so the IRS can make sure he or she reports the payments as income. Without the recipient’s tax ID number on your return, the deduction could be disallowed.
10. IRA deduction. If you contribute to a traditional IRA, you might be able to deduct at least a portion of your contribution from your income.
11. Student loan interest. Up to $2,500 of the interest you paid on a qualified student loan can be subtracted on line 33
12. Tuition and fees. The higher-education tuition and fees adjustment could reduce your taxable income by as much as $4,000
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