Tax Savings Without Itemizing
In a year when almost everyone is pinching pennies, there are lots of chances for you to save on your taxes -- even if you don’t itemize deductions.
Amounts that can be directly subtracted from your income to arrive at your adjusted gross income -- so called "above-the-line" deductions or "adjustments to income" -- provide a special advantage in keeping down the amount you'll owe or increasing your refund, says Mark Luscombe, principal federal tax analysis for CCH, a leading provider of tax and accounting information. "Even if you file the 'short' 1040A form for non-itemizers, you can take some of these deductions," Luscombe noted. The following four deductions are available on both the regular Form 1040 and the shorter 1040A.
Teachers' classroom expenses. Eligible educators can deduct up to $250 per year for unreimbursed expenses including books, supplies, computer equipment and supplemental materials used in the classroom.
IRA deductions. You can deduct up to $5,000 in contributions to a traditional IRA ($6,000 if you are 50 or older) for 2008, subject to income limits. You have until April 15 to make your contribution and still reduce your 2008 taxes. To do so, your income adjusted gross income can’t exceed $63,000 if you are single or $105,000 if you are married filing jointly. If you don’t participate in an employer-sponsored retirement plan but your spouse does, you can deduct your IRA contribution as long as your joint income for 2008 doesn’t exceed $169,000.
Student loan interest. If you have paid interest on qualified student loans, you can claim an above-the-line deduction for the interest of up to $2,500. The deduction is phased out for the individuals with a modified AGI or more than $50,000 and more than $100,000 for joint filers.
Tuition and fees. You can take up to $4,000 as an above-the -line deduction for qualifying college expenses. The deduction is reduced if your income exceeds $65,000 ($130,000 for joint filers) and completely disappears if you AGI exceeds $80,000 ($160,000 for joint filers). But you can’t double dip. You can claim either the tuition and fees deduction or a Hope or Lifetime Learning credit for each eligible student, but not both.
There are a host of other above-the-line deductions, but you must use the standard 1040 form to claim them. It's no big deal. Just use form 1040 and skip all the lines on the form that don't apply to you. Some of them include: contributions to Health Savings Accounts; travel expenses for military reservists; moving expenses for a job-related relocation; deduction for half of your self-employment taxes; and alimony payments.