Claiming tax deductions without itemizing on your tax return? It’s now a reality. Most taxpayers think they have to itemize their deductions to claim them on their tax return. However, that is not entirely true. You can claim certain deductions while still using the standard deduction.
Here is a list of tax deductions you can claim without itemizing
Charitable Contributions
- For 2020, non-itemizers can deduct up to $300 of cash contributions above-the-line. The $300 limits apply both to single and married taxpayers. Donations to donor-advised funds and private foundations aren’t eligible for the above-the-line deduction (2020 and 2021). The term “above-the-line” is a shorthand way of saying that the deduction reduces gross income when figuring adjusted gross income (AGI). Eligibility for many credits are based on AGI or modified AGI.
- For 2021, non-itemizers filing a joint return can deduct up to $600 of cash contributions. Taxpayers using other filing statuses are limited to a $300 deduction. Unlike the 2020 above-the-line deduction, the 2021 deduction is claimed after the AGI is determined.
Employment Related Tax Deductions Without Itemizing
Educator Expenses
A qualified educator can annually deduct above-the-line to a maximum of $250 of qualified unreimbursed classroom expenses. These expenses include:
- Books,
- Supplies (other than nonathletic supplies for courses of instruction in health or physical education),
- Computer equipment (including related software and services) and other equipment,
- Supplementary materials used by the eligible educator in the classroom,
- Professional development courses that are beneficial to the students for whom the educator provides instruction, and
- Personal protection equipment (PPE), disinfectant and other supplies used for the prevention of the spread of coronavirus after March 12, 2020.
A qualified educator is generally a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They generally work in a school at least 900 hours during the school year.
Performing Artist Expenses
Some performing artists are allowed to deduct their employment-related expenses as an adjustment to gross income. For taxpayers to qualify for this special rule, all of the following criteria must be met:
- They must have had two or more employers in the performing arts field during the tax year. This does not count employers who pay less than $2000;
- Business expenses must be more than 10% of their gross income earned as a performing artist; and
- Their AGI before deducting the performance-related expenses can’t be more than $16,000. Married performers must file joint returns. Unless the married performers lived apart the entire year. The two-employer requirement and 10%-of-gross-income requirement are applied to each spouse separately. However, the $16,000-AGI requirement applies to married performers’ joint income.
State and Local Government Officials’ Expenses
Employee business expenses for a government official are deductible above-the-line if the official is compensated on a fee basis. This provision is intended for officials who provide certain services to the government. Specifically for those who hire employees and incur expenses in connection with their official duties.
Health Insurance Tax Deductions Without Itemizing
Health Savings Account Contributions
Contributions to Health Savings Accounts (HSA) are also an above-the-line deduction. Eligible individuals covered by high-deductible health plans (and not covered under any other health plan) can establish an HSA. There are limits to how much you can contribute to an HSA. Subject to statutory limits, eligible individuals may make contributions to HSAs, and employers. Other persons (e.g., family members) may contribute on behalf of eligible individuals. An account holder gets a deduction for contributions to their HSA even if someone else makes contributions. However, since an employer’s contributions to an employee’s HSA are excludable from the employee’s income, the employee can’t also claim a deduction for those contributions.
Amounts in HSAs accumulate tax-free. If used to pay or reimburse qualified medical expenses, distribution are also tax-free. Some individuals also use HSAs as supplemental retirement plans.
Moving Expenses for Members of the Armed Forces
Above-the-line deductions for taxpayers’ moving expenses are suspended until 2025. However, the moving expenses deduction is allowed for members of the armed forces. Specifically if you have to move as a result of a permanent change of station. There are no requirements for distance or length of time at the new station.
Student Based Tax Deductions Without Itemizing
Student Loan Interest Deduction
A taxpayer can deduct up to $2,500 above-the-line of interest paid by the taxpayer on a student loan on behalf of the taxpayer, spouse or dependents. The student must be at least half-time. But this deduction is only for lower income taxpayers. The $2,500 limit applies per year per return, regardless of the number of eligible students or number of loans.
Tuition and Fees Deduction
This above-the-line deduction is allowed for qualified tuition and related expenses for any year. But only to the extent the expenses are in connection with enrollment at an institution of higher education during that tax year. Expenses are limited. The final amounts are dependent upon the taxpayer’s AGI. For joint returns with an AGI below $130,000, the maximum deduction is $4,000. Between $130,000 and $160,000, the maximum deduction is $2,000, and above $160,000, it is zero. For other filing statuses, the AGI limits are half of those for joint filers, except that married taxpayers using the married separate filing status aren’t eligible for any deduction. The same expenses can’t be used for this deduction and the American Opportunity Credit or the Lifetime Learning Credit, and 2020 is the last year for this deduction.
Miscellaneous Tax Deductions You can Claim Without Itemizing
Deduction for Early Withdrawal of Savings
When someone closes a savings account or CD prematurely, they may get penalized by the financial institution. Also known as an interest penalty. The interest penalty is deductible above-the-line. Deductible Part of Self-employment Tax – A self-employed taxpayer can deduct one-half of the self-employment tax computed on Schedule SE for the year.
Self-employed Health Insurance Tax Deduction
A self-employed individual may be able to deduct 100% of the amount paid during the tax year for medical insurance on behalf of themselves as an above-the-line expense. This deduction is limited to the amount of the taxpayer’s net income. Also the individual, spouse or dependent can’t have participated in a health plan subsidized by an employer.
Alimony Payments May Be Deductible
For divorce or separation entered into before 2019, an individual may be able to claim an above-the-line deduction for alimony payments made during the year. However only if certain requirements (not covered in this article) are met. Effective for divorce or separation instruments entered into after 12/31/2018, alimony payments aren’t deductible by the payer and aren’t taxable to the recipient.
Business Pass-through Tax Deduction Without Itemizing
Certain businesses now have a deduction as part of the 2018 tax reform. The deduction is generally equal to 20% of their qualified business income (QBI). The deduction is known as a pass-through income deduction. This is because it applies where the business income “passes through” to the individual’s (or partner’s) 1040 income tax return. This category includes income from a variety of business entities including:
- sole proprietorships,
- partnerships,
- S-corporations,
- rentals,
- farms,
- real estate investment trusts (REITs); and
- pass-through income from publicly traded partnerships.
This pass-through deduction, is subtracted from AGI to determine taxable income.
Retirement Plan Deductions
Contributions to traditional IRAs, self-employed SEPs, SIMPLEs and other qualified retirement plans are above-the-line deductions. However, the deduction for these contributions for an employee won’t appear as a line item on the tax return. The most common example of this treatment is 401(k) plan contributions. Specifically when the employee designates a percentage of their wage that is contributed to the plan. Their gross wages are reduced by the contribution amount. This leaves the balance of the wages as taxable.
Questions about how any of these deductions might apply to your tax return? Please give this office a call at 360-778-2901.