Wednesday, March 31, 2004
|
Wednesday, March 31, 2004 |
| CPAs offer last-minute deduction advice The Georgia Society of CPAs has some good news for taxpayers who don’t itemize: you may still qualify for above-the-line deductions that can reduce your tax bill. Above-the-line tax deductions get their name because they are taken above the line for your adjusted gross income (AGI) on the first page of your tax return. An above-the-line tax deduction reduces your AGI. This is helpful because your AGI determines whether you are eligible for other tax benefits, certain itemized deductions, and tax credits. Here are some common above-the-line deductions that can be claimed regardless of whether you itemize or claim the standard deduction. • RETIREMENT SAVINGS CONTRIBUTIONS: For 2003, contributions of up to $3,000 ($3,500 if you’re age 50 or older) to a traditional IRA may be deducted if you meet certain income requirements. These requirements differ depending on whether or not you are eligible to participate in an employer-sponsored plan. If you are self-employed, and have a retirement plan such as a Keogh or Simplified Employee Pension (SEP) plan, your contribution of up to $40,000 may be tax-deductible. • HIGHER EDUCATION EXPENSES: A tax deduction of up to $3,000 for tax year 2003, and $4,000 for 2004 and 2005 is available for qualified tuition and related expenses paid for the higher education of yourself, your spouse, or your dependents. Adjusted gross income phase-out levels are indexed annually for inflation. • EDUCATOR EXPENSES: If you’re a teacher and spend your own money on books, school supplies, software and other qualified educational materials, you can deduct up to $250 of your unreimbursed expenses. • HEALTH INSURANCE PREMIUMS: As a self-employed taxpayer, 100 percent of the health insurance costs you pay for yourself, your spouse, and your dependents is deductible. • STUDENT LOAN INTEREST: Taxpayers who meet certain income eligibility requirements may deduct up to $2,500 in interest paid on loans incurred solely to pay qualified higher education expenses. Y ou can continue to take the deduction as long as you’re paying interest, regardless of how long it takes to repay the loan. A taxpayer who is a dependent of another taxpayer or who is married and filing separately is not eligible. • ALIMONY PAID TO FORMER SPOUSE: Alimony, including back alimony, is deductible in the year paid. You must file Form 1040 and provide the recipient’s Social Security number or your deduction may be disallowed. • JOB-RELATED MOVING EXPENSES: To deduct moving expenses, you must meet two tests: (1) your new job must be at least 50 miles farther from your former home than your old job location; and (2) you must work full-time for at least 39 weeks during the 12-month period following the move. Deductible expenses include the cost of moving your household goods and personal effects. You can also deduct travel costs to the new residence for you and your family, including lodging but not meals. • PENALTY FOR EARLY SAVINGS WITHDRAWAL: If you cashed in a certificate of deposit and incurred an early-withdrawal penalty, the penalty is deductible. The deductible amount should appear under forfeited interest on Form 1099 from your bank. • HYBRID VEHICLES: Hybrid vehicles, including the Honda hybrid Civic and Insight and the Toyota Prius, are eligible for a one-time federal tax deduction of up to $2,000 in 2003, even if it I is used entirely for personal purposes. The deduction must be applied in the tax year in which the vehicle was purchased. In addition, you must be the original owner and the deduction is allowed only for the first year of use. Under current law, this clean-fuel vehicle deduction will be phased out in tax years 2004 through 2006. CPAs say that, in addition to these above-the-line deductions, there are also many tax credits available for those who do not itemize. A CPA can answer any questions you may have. The GSCPA is the premier professional organization for CPAs in the state of Georgia . With over 10,500 members throughout the state, the purpose of the GSCPA is to promote the study of accountancy and applicable laws, provide continuing professional education, maintain high ethical and work standards, and provide information about accounting issues to the membership and the public. For more information, access our web site at www.gscpa.org
|
Back to the top of the page