The Top Five Tax Deductions for People Who Do Not Itemize

Taxpayers who do not itemize their deductions are often the first who file their taxes each year in hopes of getting a refund. Some familiar tax deductions, like mortgage interest and real estate taxes are not available to taxpayers who do not itemize their deduction but some other deductions are available for everyone. These deductions fall into the class known as adjustments to income. www.irs.gov/taxtopics/tc450.html Taking advantage of these deductions is an easy way to reduce your tax bill and save hundreds or even thousands of dollars. Before you file, consider these items; they may save you a lot of taxes and increase your refund substantially.

1. IRA deduction - If you open an Individual Retirement Arrangement and make a deposit into your Individual Retirement Account by April 15, 2011 (or later, if allowed by IRS) then you will be able to deduct this amount against your 2010 income. The maximum deduction for 2010 is $5,000 for a single individual or $10,000 for a married couple, filing jointly. In a 15% tax bracket this will save a single person $750, instantly; in a 25% bracket the saving totals $1,250. www.irs.gov/retirement/participant/article/0,,id=188232,00.html If you are age 50 or over the limitation on the deduction becomes $6,000 per taxpayer.

2. Student Loan Interest - If you paid interest on your student loans during 2010, you are entitled to deduct that amount (subject to some income limitations) on your tax return. The maximum deduction is the amount of interest you actually paid or $2,500. This deduction can save you some money and help offset the burden of the loan debt. www.irs.gov/taxtopics/tc456.html

3. Tuitions and Fees deduction - If you, your spouse or your dependant attended a post secondary school and paid tuition and fees during 2010, you are entitled to take a deduction for some of that cost. The maximum deduction, depending on your income, is $4,000. You will need to attach Form 8917 to your tax return to compute and receive this deduction. Even if you just took a course or two during the year this deduction is available to you. www.irs.gov/publications/p970
Tip: Because there is a tax credit also associated with this particular expense, you may need to prepare Form 8863 as well to see which form gives you the most tax savings.

4. If you are a teacher, instructor, counselor, principal, or aide and work at least half time (minimum of 900 hours per year) in a K-12 school, you are entitled to a deduction for educator expenses of up to $250 per year. Expenditures for books, supplies, computer equipment, and other classroom expenditures all qualify for the deduction. www.irs.gov/taxtopics/tc458.html It is not a big deduction but every penny helps.

5. If you moved during the year for business purposes, you may be entitled to deduct a great portion of your moving expenses. This deduction does not work for everyone. Generally, you must have started a new job and, subject to some time and distance rules, your move must be within a year of starting the new job and must meet a 50 mile test which states that: "Your new main job is at least fifty miles further from your former residence than your old main job location was." www.irs.gov/publications/p521/ar02.html You can also qualify for this deduction if this is your first job (or first job in a while) and you had to move at least 50 miles to be closer to your new job. There is no limitation in dollars on this deduction and you can deduct the actual cost of moving all of your household furniture and furnishings and any travel expenses (not meals along the way) that you incur.

Tip: If you qualify for a traditional IRA, taxing advantage of this deduction may be the best tax move you ever make. It will save you taxes now and allow you to accumulate a substantial amount for retirement. Someone age 25 depositing $5,000 a year in an IRA account for 40 years will have over $600,000 in investments if they can average just 5% earnings per year.

Postscript: There are other deductions available for taxpayers who do not itemize but they are used far less often by the average taxpayer. Check out lines 23 - 35 of your 2010 form 1040 to see if any other deductions apply. If they do www.irs.gov will have information for each of these items or better yet consult a CPA or tax attorney to guide you through these more complex items.