Discovering Above The Line Tax Reductions for your return in 2009
When it comes to federal income taxes, your focus needs to be to pay only what is owed, nothing more. Since your tax liability is calculated by your net income, the best way to reduce the taxes you pay is to reduce your income. Of course, you need to do this without illegally reducing your income. You can do this by taking certain above-the-line tax deductions.
Above-the-line-tax deductions are basically like tax deductions that are adjustments to your income. They’re labeled above-the-line because they are reduced on the front page of the tax return just above the bottom line. These deductions limit your adjustable gross income and in the end reduce your tax liability.
The list below are some above-the-line tax deductions that are discussed in our Internet Tax Guide which you should consider if you are eligible.
• Moving expenses, if you moved for professional purposes.
• Self-employment. Half the amount of taxes that are calculated to Social Security and Medicare.
• Self-employed retirement plans.
• Self-employed health insurance. The total amount you pay in health insurance premiums not only for yourself, but for your spouse and dependents as well. Even contributions towards long-term care policies are deductible.
• Penalties paid for early withdrawal of savings. The account manager of such an account should send you a 1099-INT or 1099-OID form including the early withdrawal penalty.
• Alimony payments. If you became divorced and paying alimony, you can deduct these payments from your income. You must provide your ex-spouse’s social security number; or the deduction might be disallowed.
• IRA deductions for amounts contributed to traditional IRAs for individuals who are self-employed.
• Student loan interest. Up to $2,500 in student loan interest paid can be deducted for single filers making $65,000 or less or joint filers making $135,000 or less.
• Jury duty pay if it was turned over to your employer.
You can obtain most of these above-the-line tax deductions by using the long form, 1040. If you prefer to use the short from, 1040A, you may still take a few of these deductions. Early account withdrawal penalties, IRA contributions, student loan interest and jury pay are a few of the above-the-line-tax deductions that may be claimed on the 1040A tax return. Consult with your personal tax consultant for more details or check out this Domain Tax Guide Review.
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