Identifying Above The Line Tax Reductions for your business in 2010
When it comes to federal income taxes, your focus needs to be to pay only what is appropriate, nothing more. Since your tax liability is calculated by your net income, the best way to reduce the taxes you pay is to minimize your income. Of course, you must do this without illegally reducing your income. You can do this by taking legal above-the-line tax deductions.
Above-the-line-tax deductions are more like tax deductions that are adjustments to your income. They’re identified as above-the-line because they are reduced on the front page of the tax return just above the bottom line. These deductions minimize your adjustable gross income and ultimately reduce your tax liability.
The items below are a few above-the-line tax deductions that are discussed in our Domainer Tax Guide which you should take if you are eligible.
• Moving expenses, if you moved for job purposes.
• Self-employment. Half the amount of taxes that are paid to Social Security and Medicare.
• Self-employed retirement plans.
• Self-employed health insurance. The total cost you pay in health insurance fees not only for yourself, but for your spouse and dependents as well. Even contributions towards long-term care policies are included.
• 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; otherwise the deduction might be disallowed.
• IRA deductions for amounts contributed to traditional IRAs for people 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.
Individuals can get 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 utilize some of these deductions. Early account withdrawal penalties, IRA contributions, student loan interest and jury pay are 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.
This entry was posted on Friday, March 5th, 2010 at 4:48 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.