Deductions: Standard,
Itemized, Above-the-Line, Business
Standard
Deduction: a fixed amount that reduces
the income on which you are taxed based on
filing status.
or Married Filing Separately $5,350
Married Filing Jointly or Qualifying
Widower $10,700
Head of Household $7,850
If itemized deductions are more than the
standard deduction, itemizing will save you
more.
You can claim
above-the-line deductions
whether you itemize or not.
Schedule C filers may qualify for additional
deductions.
Deductions allow you to reduce your taxable
income and also your tax bill. A deduction
differs from a credit, which is applied
directly to your tax bill, reducing it
dollar for dollar. There are 4 major
categories of deductions.
Itemized Deductions
Certain kinds of deductions are called
itemized deductions. If you have enough of
them to beat the standard deduction, it's
usually a good idea to itemize. For most
taxpayers, purchasing a home makes itemizing
worthwhile. Here are some other popular
itemized deductions from the IRS
Above-the-line Deductions
If you qualify, you can claim these
deductions even if you don't itemize.
Student Loan Interest Deduction up to
$2,500
Tuition and Fees Deduction up to $4,000 for higher education expenses.
Moving expenses the cost of moving to a new job location
Alimony, the amount of alimony you paid
Military reservists deduction a deduction
for non-reimbursable travel expenses for
reservists who service more than 100 miles
from home and stay overnight
Traditional IRA contributions up to $4,000, $5,000 if
your 50 or older.
Self-employment above-the-line deductions:
Half of your self-employment, Social
Security and Medicare tax
100% of self-employed health insurance
premiums for yourself and family
Contributions to self-employed retirement
plans, such as SEPs and SIMPLEs
Schedule C Business Deductions
If you own your own business, some
additional deductions apply to you. These
are claimed directly on your business
schedule, called a Schedule C. Farmers and
owners of rental property use Schedule E.
Deductions include
home office expenses
advertising and promotional costs
business liability insurance
legal and professional services
car and truck expenses
wages, employment taxes, employee benefit
plans and
retirement plans
depreciations
For other deductible items, see
schedules C and E. There are many rules and
limitations pertaining to some of these
deductions.
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