You’re probably familiar with the deduction choice you must make when you file your tax return. You either have enough deductions (such as mortgage interest, charitable contributions, and medical expenses) to itemize, or you take the standard deduction, a set amount that doesn’t require you to list specific deductible items.
What you may not be as familiar with are those deductions that you are allowed to take “above the line”; that is, deductions that you can take in addition to your itemized deductions or the standard deduction.
Here’s a quick rundown of above-the-line deductions you shouldn’t overlook when you prepare your 2010 tax return.
* A deduction of up to $250 for classroom supplies purchased by teachers for use in their classrooms.
* A deduction of up to $5,000 for individual retirement account contributions if you’re under age 50. If you’re 50 or older, you can deduct up to $6,000.
* A deduction of up to $2,500 for interest paid on student loans.
* A deduction of up to $2,000 or $4,000 for college tuition and fees, depending on your income level.
* A deduction for the expenses connected with a job-related move.
* A deduction for 50% of the self-employment tax paid if you are self-employed.
* A deduction for alimony paid. (Note that child support is not deductible.)
* A deduction for contributions to health savings accounts.
Most of these deductions have qualification requirements or income limitations. Don’t overlook above-the-line tax deductions. An added benefit: These deductions decrease your “adjusted gross income,” an important number on your tax return. The lower your adjusted gross income, the more likely you are to qualify for credits and deductions subject to income thresholds. For details or assistance in finding all the deductions you’re entitled to, give us a call.David Bradsher, CPA