Deciding whether to itemize or take the standard deduction became somewhat easier for the 2010 tax year when standard deductions for disaster losses, real estate taxes and new motor vehicle taxes and the Schedule L used to calculate them were largely eliminated for 2010, according to a statement issued Thursday by CCH.
For 2010, the standard deduction is $5,700 for single filers ($11,400 for joint filers). Taxpayers who have expenses that exceed that amount related to unreimbursed employee expenses, tax preparation fees and other expenses such as certain taxes, interest, personal casualty and theft losses, and medical expenses, may want to determine whether itemizing will save them more money, CCH said.
Regardless of whether taxpayers take the standard deduction or itemize, they can take above-the-line deductions. “Assuming you qualify, above-the-line deductions are easy ways to substantially lower your taxes,” CCH principal federal tax analyst Mark Luscombe said in the statement.
CCH cautioned, however, that because not all deductions are available on all forms, taxpayers need to be certain they are completing the form that allows them to claim the deductions to which they are entitled. For example, taxpayers claiming an IRA deduction or deductions for three education-related expenses can use either Form 1040 or 1040A. However, taxpayers looking to claim several other above-the-line deductions, including those for Health Savings Accounts or for the self-employed, can do so only on Form 1040.
In its statement, CCH outlined 10 common above-the-line deductions and the forms on which they are available. Each of the following deductions can be claimed on either Form 1040 or 1040A:
IRA deductions. The maximum deduction for an IRA is $5,000 for 2010 or $6,000 for individuals 50 and older making a catch-up contribution. For 2010, the deduction begins to phase out at adjusted gross income (AGI) levels above $56,000 ($89,000 for joint filers), and is not available to taxpayers with AGI above $66,000 ($109,000).
Student loan interest.The 2010 Tax Relief Act extended the above-the-line deduction for student loan interest up to $2,500 annually through 2012. For 2010, the deduction
begins to phase out at AGI levels above $60,000 ($120,000), and is not available to taxpayers with AGI above $75,000 ($150,000).