Finding Above The Line Tax Reductions for your business in 2010
When it comes to federal business taxes, your goal needs to be to pay only what’s appropriate, nothing more. Because your tax liability is calculated by your income, the surest way to lower the taxes you pay is to minimize your income. Of course, you need to do this without technically reducing your income. You can do this by taking legal above-the-line tax deductions.
Above-the-line-tax deductions are basically like tax breaks that are adjustments to your income. They’re called above-the-line because they are claimed on the first page of the tax return just above the bottom line. These deductions reduce your adjustable gross income and in the end decrease your tax liability.
The following are some above-the-line tax deductions that are discussed in our Internet Tax Guide which you should consider if you are eligible.
• Moving expenses, if you relocated for professional purposes.
• Self-employment. Half the total of taxes that are calculated to Social Security and Medicare.
• Self-employed retirement plans.
• Self-employed health insurance. The total cost you fund in health insurance premiums not only for yourself, but for your spouse and dependents as well. Even contributions towards long-term care policies are deductible.
• Penalties paid for early withdrawal of savings. The account manager of such an account should send you a 1099-INT or 1099-OID form including the early withdrawal penalty.
• Alimony payments. If you became divorced and paying alimony, you can deduct these payments from your income. You must provide your ex-spouse’s social security number; or the deduction might be disallowed.
• IRA deductions for amounts contributed to traditional IRAs for people who are self-employed.
• Student loan interest. Up to $2,500 in student loan interest paid can be deducted for single filers making $65,000 or less or joint filers making $135,000 or less.
• Jury duty pay if it was turned over to your employer.
Individuals can obtain many of these above-the-line tax deductions by using the long form, 1040. If you prefer to use the short from, 1040A, you may still take a few of these deductions. Early account withdrawal penalties, IRA contributions, student loan interest and jury pay are the above-the-line-tax deductions that are allowed on the 1040A tax return. Consult with your personal tax consultant for more details or check out this Domain Tax Guide Review.
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