TAX TIP No. 34
No need to itemize above-the-line deductions
9. Alimony paid. Divorced filers get a chance to recoup alimony payments
on line 31. Be sure to include the Social Security number
of your ex-spouse, so the IRS can make sure he or she
reports the payments as income. Without the recipient's
tax ID number on your return, the deduction could be
10. IRA deduction. If your company doesn't offer a retirement plan,
you might be eligible to contribute up to $5,000 for the 2008 tax year to a traditional individual retirement account and subtract that full amount from your income. The amount goes to $6,000 if you're 50 or older. Enter the deductible contribution on line 32.
Even if you have a company pension plan
or 401(k), or are eligible to participate in one, the Internal Revenue Service has increased the earnings limits -- as much as $63,000 for single filers; $105,000 for a married, joint-filing taxpayer with a pension; or $169,000 if you're married and don't have a pension plan at work but your employed spouse does -- so that more people are able to take at least
a portion of this tax break. An IRA deduction work sheet
is included in the Form 1040 instructions, which will
also help joint filers figure an allowable deduction
where only one spouse is covered by a pension at work.
however, need to pay special
attention. Since the IRS normally
requires you to start taking minimum
distributions from your
IRA in the year you turn 70½,
if you were that age or older
at the end of the year, you
cannot deduct any contributions
made to a traditional IRA.
11. Student loan
interest. Up to $2,500 of the interest you paid
on a qualified student loan can be subtracted on line 33.
The loan can be for you, your spouse or a dependent.
You are no longer limited to deducting interest paid
during the first 60 months of the loan, making longer-term
college loans more tax valuable. However, this deduction amount is reduced if you make more than $55,000 and are a single filer or $115,000 or more and file jointly with your spouse. Married taxpayers who file separate returns cannot claim this adjustment.
Tuition and fees. The
higher education tuition and
fees adjustment returns to
tax forms this year. This
tax break could reduce your
taxable income by as much
as $4,000. You'll need to
complete Form 8917 and then
enter the amount of tuition
and fees deduction calculated
there on line 34.
Domestic production activities. This above-the-line deduction
was created to encourage "made
in the U.S.A." manufacturing
efforts. U.S.-based businesses
that manufacture products
domestically instead of sending
the work overseas might be able to deduct
up to 6 percent of the money
earned or 50 percent of the
wages paid in connection with
the production effort, whichever
is less. This tax break applies
not only to such expected
occupations as construction
or farming, but also is available
to certain creators of software,
films or recordings.
You'll need Form 8903 to figure this
credit. Don't forget to also enter the eligible amount on line 35 of your Form 1040.
Updated: Feb. 23, 2009