Some deductions are only allowed if you itemize deductions. Some of these include the mortgage interest deduction, charitable contributions, along with state and local taxes.
However, most people don’t itemize, so these help a portion of Americans, but others are left out in the cold (and in return, they get to take the standard deduction, which if you are using, gives you a larger deduction than you’d get by itemizing).
For the 2013 tax year, you should itemize if you are single if your total itemized deductions total at least $6,100, or $12,200 if married ($6,200 and $12,400 for tax year 2014).
Above The Line Deductions
For those of us who don’t itemize, there are still tax deductions that we can take without itemizing. These are called above the line deductions because they reduce the your Adjusted Gross Income before calculating the tax owed. So while it is called a deduction, it really is simply reducing the income you are taxed on.
Here are several above the line deductions that anyone can take:
Retirement Plan Contributions
If you make any contributions to self-employed retirement plans, such as SEP-IRAs, SIMPLE IRAs, Keogh plans, and solo 401(k) plans, you can deduct your contributions. Remember, Roth 401(k) contributions are not deductible!
For both 2013 and 2014, contributions to IRA accounts (but not Roth IRA accounts) up to $5,500 ($6,500 for those over 50) are deductible, depending on your income.
Student Loan Interest
For tax year 2013, up to $2,500 of student loan interest paid is deductible from your gross income provided that your Modified Adjusted Gross Income is below $7,500 if single, $155,000 if married filing a joint return. For 2014
Self-Employed Health Insurance
If you are self-employed (and neither you nor your spouse is covered by an employer plan), have a net profit for the year, and pay for health insurance, you may deduct health insurance premiums for yourself, your spouse, and dependents. There are a lot of qualifying expenses, including but not limited to: doctor’s office payments, medication, glasses and contact lenses, and transportation to medical facilities. Find out more on the IRS website.
For 2013, you could deduct up to the $3,250 allowed for individual coverage; and $6,450 for family coverage. If you are 55 or older, there is an additional allowance of $1,000 for catch-up contributions. Of course, you must be eligible for an HSA to have one.
Employee Moving Expenses
If you meet the requirements of moving for a job, you can deduct your moving expenses even if you don’t itemize. The rules are a bit complicated for this one (example: your new job location must be at least 50 miles farther from your former home than your old job location was), so be sure to check out the IRS guide on moving expenses for this one.
50% of Self-Employment Taxes
If you are self-employed, you may deduct half of self-employment taxes. This includes the 12.4% Social Security tax on your net self-employment income and the 2.9% medicare tax on all net self-employment income. Half of it is considered as the “employer” portion and is therefore deductible.
While you can’t deduct child support payments, you may deduct court-ordered alimony payments to a former spouse spouse.
Take Advantage Of These Above The Line Tax Deductions
That is a lot of opportunity to reduce your tax bill Whether you itemize or not, you can use any of these deductions to reduce your taxable income and save some big money on your taxes.