Every taxpayer can take the standard deduction. You may also be able to lower your income tax bill by itemizing. Itemizing your deductions will give you access to additional tax breaks. But there are also a number of deductions you can take without itemizing. Here’s a breakdown.
Adjustments to Income
How can you claim additional deductions if you’re taking the standard deduction? If you look at the income tax return Form 1040, which is the standard form that all filers use, you’ll see that line 7 asks for your adjusted gross income. Your adjusted gross income (AGI) is equal to your total income minus your adjustments to income.
Adjustments to income are basically extra deductions that reduce the amount of income you have to pay tax on. Because they’re above-the-line deductions (they’re literally above the line where you write in your AGI), anyone can claim them. You don’t need to itemize. There are many adjustments to income, some of which change year to year. Here are nine kinds of expenses you can usually write off.
1. Educator Expenses
For your 2019 taxes, which you file in early 2020, teachers, counselors and principals who aren’t reimbursed for buying supplies can deduct up to $250. If they’re married to another educator and they’re filing jointly, the limit rises to $500. (Previously, you could itemize to claim more $250 in deductions for these expenses. You can no longer do that, starting with your 2018 taxes.)
To claim the above-the-line deduction for educator expenses, you have to put in at least 900 hours of work in a given tax year. If you’ve taken money from a Coverdell savings account without paying taxes or you’ve received non-taxable funds from a tuition program, you’re required to subtract those amounts from the total number of educator expenses.
To deduct your educator expenses, you will need to fill out Schedule 1. Line 23 of this form allows you to add your educator expenses. Then you can use this amount to calculate your AGI on your 1040 (using line 6 and line 7).
2. Student Loan Interest
Paying off your own student loans or your child’s loans? You can get a tax break for up to $2,500 of paid interest. There are some important income limits to know, though. If you’re single, you’re not eligible if your modified adjusted gross income (MAGI) is $80,000 or higher. For married couples filing a joint return, your MAGI must be below $165,000. If you’re married but you’re filing separately, you can’t claim the deduction at all.
For tax year 2019, student loan interest counts as an above-the-line deduction on Schedule 1 (line 33) of Form 1040.
3. HSA Contributions
Anyone with a health savings account can get a tax break for contributions they’ve made using after-tax dollars. The catch is that these funds have to pay for qualified health expenses. Single folks can deduct up to $3,500 for tax year 2018 and those with family coverage can deduct up to $7,000. Account holders who are at least 55 get an additional $1,000.
4. IRA Contributions
Your ability to qualify for the traditional IRA deduction depends on your income level and whether you or your spouse has an employer-sponsored retirement plan. Single savers with a 401(k) or a similar account at work can take the full deduction if their MAGI is $63,000 or less. Singles without an employer plan, however, can get a tax break for their IRA contributions regardless of how much they make. Once you turn 70 1/2, you’re no longer eligible for the IRA deduction. And there’s no deduction for Roth IRA contributions. It’s a good idea to look over the contribution and income limits for IRAs.
5. Self-Employed Retirement Contributions
By socking away money in a SEP-IRA or a SIMPLE IRA, self-employed individuals can earn a tax break. If you are self-employed, the most you can deduct for contributions to an SEP-IRA is $12,500 for you or your employee (or $15,500 if you’re over the age of 50). You can learn more about setting up
6. Early Withdrawal Penalties
If you withdraw earnings from a certificate of deposit (or another time-deposit account) before it matures, your bank will charge you a fee. That’s too bad. Fortunately, you can deduct the full amount of the penalty on Form 1040. You will just need to attach Schedule 1.
7. Alimony Payments
You can write off the alimony payments you’ve made to an ex-spouse even if you’re claiming the standard deduction. Child support payments, however, are not tax-deductible.
8. Certain Business Expenses
For the most part, employees have to itemize their business expenses using a separate form (Schedule A). But some workers – like performing artists and certain government officials – can simply include them on their income tax returns (line 24 of Schedule 1).
9. Jury Duty Payments
Besides the above-the-line deductions, there are other tax breaks (called write-in adjustments) that you can write in and claim without itemizing. Whatever you earn from jury duty, for instance, counts as a write-in adjustment if you gave that payment to your employer, because the employer paid your salary while you were away on jury duty.
Taking the standard deduction instead of itemizing can save you a lot of time and effort. But by forgetting to claim the bonus deductions on your tax return, you could end up paying more taxes than you need to.
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