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Tax Deductions When You Don’t Itemize…

February 22, 2011

Many taxpayers don’t take common deductions – for mortgage interest, charitable donations and medical expenses. The reason?  They don’t “itemize” by claiming these or any other expenses on Schedule A of Form 1040.  It’s easy to see why. For many people, the standard deduction for 2010 – $11,400 for couples and $5,700 for singles – is higher than the total of their itemized deductions, so they’re better off taking the standard deduction. There are several smart ways to boost your tax savings even if you don’t itemize and, instead, take the standard deduction. A number of so-called above-the-line write-offs are available. Here are some examples:

  • Individual Retirement Accounts (IRAs). You can contribute up to $5,000 to an IRA, $6,000 for those of you 50 or older.
  • Health Savings Accounts (HSAs). These are IRA-like accounts that can be used to pay health-care expenses.
  • Student-Loan Interest. You can deduct up to $2,500 worth of interest paid on student loans.
  • Legal Fees in Discrimination Suits. If you recover an award in a discrimination action(the full amount which is taxable income), legal fees are deductible even if you do not itemize.
  • Alimony. 100% deductible for the payer and considered taxable income for the recipient.
  • Moving Expenses. If you moved for a job or other business reasons your move is deductible.
  • Early Withdrawal Penalties. If you cash in a bank CD, any resulting penalty can be deducted.
  • Special Write-Offs For The Self-Employed. Self Employment Retirement Plans, Self  Employment Tax and Self Employment Health Insurance.

I’ve always said that the IRS gives the taxpayer many available write-offs and have always been surprised how many taxpayers are not aware of what is available. That is why at Gunwel Tax & Bookkeeping we feel it is necessary to work with a tax professional. At GAI (www.gunwel.com) we want to be that tax person in your life. Give us a call at 212-979-6830 or stop by for a visit. We can show you what write-offs you can take. See you soon!

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