tax

No need to itemize above-the-line deductions

TAX TIP No. 33


What do teachers, divorcees and people paying off student loans have in common? Tax breaks without itemizing.

In this tax tip:
 
 
 

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. There's no need to complete Schedule A, with its percentage-of-income thresholds and deduction phaseouts.

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 1040, just above the page's last line -- No. 37 on the 2007 return -- where you enter your adjusted gross income, or AGI.

Taking these deductions will reduce your AGI, which in most cases directly cuts your overall tax bill because figuring your AGI is the first step in arriving at your final taxable income amount. The less taxable income, the less you'll owe the Internal Revenue Service.

While you don't have to hassle with Schedule A, a few above-the-line tax breaks do require you to fill out another IRS form or work sheet. Still, that's a relatively small time commitment to shave some dollars off your tax bill.

Popular adjustments back on form
There's even better news for some eligible taxpayers this filing season. A couple of the more popular adjustments -- classroom supplies bought by teachers and tuition and fees paid by students -- are back on the form. Last year, because Congress took too long to reauthorize them, the IRS wasn't able to get them on the forms. That meant taxpayers had to take extra care in claiming them. But on the 2007 form, they're back in black and white and easy to locate.

Listed below, in the order in which they appear on lines 23 through 36 of the 2007 Form 1040, are those and the rest of the 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. The amount is relatively small, but because it's an above-the-line deduction, there's no need to meet the 2 percent of AGI limit that would be required if these expenses were itemized on Schedule A as miscellaneous workplace deductions. So, more taxpayers should be able to claim at least some of their school-related expenditures right on line 23.

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2. Certain business expenses. Unreimbursed business expenses also usually appear on Schedule A as a miscellaneous deduction. But some taxpayers get to claim their work-related costs as above-the-line deductions on line 24 without worrying about a percentage threshold; they are military reservists, performing artists and fee-basis government officials. Although this collection sounds more like the cast of an avant-garde foreign-language film than related taxpayers, lawmakers have deemed that anyone who falls into one of these categories deserves special tax treatment.

-- Updated: Feb. 19, 2008

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