Finding Above The Line Tax Reductions for your business in the New Year

When it comes to federal internet taxes, your goal should be to pay just what is appropriate, nothing more. Because your tax liability is calculated by your net income, the surest way to lower the taxes you owe is to minimize your income. Of course, you must do this without illegally 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 labeled above-the-line because they are subtracted on the front 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 items below are some above-the-line tax deductions that are discussed in our Domainer Tax Guide which you can take if you are eligible.

• Moving expenses, if you relocated for employment purposes.

• Self-employment. Half the amount of taxes that are paid to Social Security and Medicare.

• Self-employed retirement plans.

• Self-employed health insurance. The total amount you pay in health insurance premiums not only for yourself, but for your spouse and dependents as well. Even contributions towards long-term care policies are included.

• 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 are 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.

You can get most of these above-the-line tax deductions by using the long form, 1040. If you would rather use the short from, 1040A, you may still utilize some of these deductions. Early account withdrawal penalties, IRA contributions, student loan interest and jury pay are a few of 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.

Comments are closed.