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Deductions allowed when you do not itemize

This week we will discuss deductions that are available to be used on your tax return, even if you DO NOT itemize.

There are two ways to reduce your income on your income tax returns. Reducing your income is a way to also reduce the income tax you may be responsible for. The two methods are known as itemizing your deductions or using the standard deduction. Many taxpayers find that they are better off using the standard deduction, rather than itemizing on their tax returns.  The standard deduction is a pre-arranged tax deduction the IRS allows taxpayers to claim on their tax returns, based on marital status, among other things. For instance, the standard deduction for 2013 for single taxpayers is $6100, head of household taxpayers can use $8950, while married filing joint taxpayers are allowed $12,200 as a standard deduction. This is a reduction of taxable income, along with personal exemptions that reduce your taxable income, before federal income tax is computed.  But some deductions are available without having to itemize and called deductions FOR Adjusted Gross Income (AGI). Deductions for AGI are ALWAYS better than deductions from AGI (which is either a Standard Deduction or Itemized Deductions).

 

There are other tax deductions you can also deduct in addition to the standard deductions, for example 

 

 

  • IRA contributions (There are certain rules allowing this deduction, depending on whether you or your spouse are in a retirement plan at work, and depending on how much income you earn)

 

  • Self Employment Retirement Savings Plans (SEP, Keogh)

 

  • Student loan interest ($2,500 max per tax return)

 

  • Tuition fees ($4,000 max per tax return)

 

  • Self Employment Health Insurance Payments (You can deduct 100% of health insurance premiums and part of any long term care policy premiums)

 

  • Alimony paid to former spouse

 

  • Health Savings Accounts (This is a medical savings plan where you can contribute money for future medical bills and get a tax deduction for doing so)

 

  • Self Employment Social Security and Medicare Tax (Self employed must pay 100% of any Medicare and Social Security tax to the IRS, but they also receive a ½ deduction on the front of their tax return as a benefit of being self employed)

 

  • Moving expenses paid because of change in jobs (You can only deduct moving expense because of work requirements such as getting another job or a job transfer)

 

  • Early withdrawal penalties from CD’s, savings accounts, insurance contracts

 

  • Educator expenses for supplies purchased for classrooms, up to $250 until 2014

 

  • National Guard or Reservist expenses (for those who work out of town overnight)

 

 

Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331.

 

 

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