10 ways to maximize your tax deductions -- without itemizing
Here are 10 ways to maximize your tax deductions -- without going through the trouble of itemizing:
- New Car Sales Tax. A deduction is available on your 2009 tax return for state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle. To qualify, you had to have made the purchase between February 16, 2009, and January 1, 2010, and meet certain income requirements: phase outs begin for individual taxpayers with modified adjusted gross income (AGI) of $125,000 and married taxpayers with modified AGI of $250,000. If you live in a state that doesn't have a sales tax (Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon), you can deduct other fees or taxes related to the purchase of the vehicle. Qualifying fees or taxes are those assessed on the purchase of the vehicle and are based on the vehicle's sales price or as a per unit fee. To report the new car sales tax deduction on your return, you'll need to file a Schedule L.
- State or Local Real Estate Taxes. You can also use Schedule L to report any state and local real estate taxes you paid in 2009, up to $500 ($1,000 if married filing jointly). In prior years, you could only take a deduction for real estate taxes paid if you itemized; in 2009, you can increase your standard deduction so long as the taxes would have been deductible on Form 1040 (Schedule A).
- Net Disaster Loss. Schedule L is also useful for reporting a net disaster loss on a form 4684, Casualties and Thefts. Under prior law, taxpayers who suffered casualty losses as a result of a federally declared disaster were required, among other things, to reduce the total of their casualty losses by 10% of their adjusted gross income (AGI). In addition, taxpayers were required to claim their casualty losses as an itemized deduction. But, for 2009, taxpayers may increase their standard deduction by any net disaster loss from a federally declared disaster; the 10% AGI limit has also been removed. You can find a list of areas that were declared federal disasters in 2009 on FEMA's Web site.
- Alimony. Payments that qualify as alimony can be deducted on your federal income tax return. To qualify, the payments must be "to or for a spouse or former spouse under a divorce or separation instrument." In other words, you must have an official agreement requiring the payment of support in cash or cash equivalent; noncash property settlements don't qualify. Additionally, payments which can be characterized as child support don't count as alimony payments.
- Career-Related Moving Expenses. If you moved in 2009 for reasons related to your job or business or in order to start a new job, you may be able to deduct your moving expenses. Your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace; if you had no old workplace, your new workplace must be at least 50 miles from your old home. To report your moving expenses, you'll need to complete a form 3903, Moving Expenses.
- Health Savings Account Deduction. Health Savings Accounts (HSAs) are tax-favored accounts that allow taxpayers to save for medical expenses. For 2009, you can contribute up to $3,000 as a single or $5,950 as a family. You may be able to take a deduction for those contributions that you make to a HSA during the year; employer contributions, rollovers, and qualified HSA funding distributions from an IRA do not count for purposes of a deduction. Report contributions using a form 8889, Health Savings Accounts (HSAs).
- IRA Contributions. Qualified contributions to your IRA will reduce your tax bill since they're deductible. You can make a distribution through April 15, 2010, and it will still qualify as a deduction on your 2009 return. The maximum contribution you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable income for 2009; you can split the limit between a traditional and Roth IRA. If you're not working, you can still contribute to an IRA and get the deduction. A non-working spouse can make a deductible IRA contribution of up to $5,000 for 2009 ($6,000 if age 50 or older as of December 31, 2009), as long as the couple files a joint return and the working spouse has enough earned income to cover the contribution. In both cases, the employee and employee's spouse are subject to income limits and phase outs.
- Tuition and Fees Deduction. If you, your spouse, or your dependent was a student in 2009, you may be able to deduct tuition and fees paid to an eligible school. An eligible school would include any college, university, vocational school, or other post-secondary educational institution that participates in a student aid program administered by the Department of Education.You cannot take the deduction if your filing status is married filing separately, you were a nonresident at any time during the year, you could be claimed as an exemption by any other person (even if they didn't actually claim you), or if your modified AGI is more than $80,000 ($160,000 if filing a joint return). You may be able to take the American Opportunity credit, Hope credit, or Lifetime Learning credit for your education expenses instead of the tuition and fees deduction but you may not take both. To figure your deduction, use form 8917, Tuition and Fees Deduction.
- Educator Expenses. Teachers (for grades K-12), instructors, counselors, principals, or aides who worked in a school for at least 900 hours during the school year in 2009 can take a deduction of up to $250 for qualified expenses. Expenses over the $250 can be taken as an itemized deduction on a Schedule A. Qualified expenses include expenses paid in connection with books, supplies, equipment (including computer equipment, software and services), and other materials used in the classroom. Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education.
- Student Loan Interest Deduction. If you paid interest on a qualified student loan in 2009, you might be able to deduct it on your federal income tax return. To qualify, you must have paid interest during the year for a student loan used solely to pay qualified higher education expenses; your filing status must not be married filing separately; your modified AGI must be less than $70,000 ($145,000 if filing jointly); and you and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return. If you didn't make payments during the year, and your parents make a payment on your behalf, the IRS may still allow you to deduct up to $2,500 of student loan interest.