Stop Giving Your Money Away: Learn About Tax Deductions
The adjusted gross income (AGI) and the modified adjusted gross income (MAGI) of a family or individual are major factors that can determine tax benefit eligibility. Having an AGI or MAGI that's out of range can cause denial of certain tax benefits. This can create the same feeling of frustration you get when you can't perform a simple physical task simply because you're too big or too small.
It is not hard to calculate your adjusted gross income. The calculation simply requires that you take all of your income reported and subtract your deductions. Legally, you can take the following as deductions from your total gross income.
Expenses related to employment including:
- Rent expenses and royalty expenses,
- Half of the self employment tax
- $250 of educator expenses
- Qualified expenses of performing artists and
- Any contributions to investments, savings plans or retirement plans
Deductible medical expenses include the cost of health insurance for the self employed, contributions to Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (MSAs).
Deductible investment expenses include the interest lost by withdrawing CDs before they mature and up to $3000 of capital losses each year.
Business Expenses
-General business expenses
-Domestic production activities deduction
-Net operating losses (NOLs)
Educational Expenses
-Student loan interest up to $2,500
-Tuition and fees up to $4,000
-Travel expenses from attending National Guard or military reserve meetings more than 100 miles from home
Other Expenses
-Jury duty pay turned over to your employer
-Legal fees for illegal discrimination claims
-Moving expenses
-Unemployment benefits repaid because of trade readjustment allowances
It is very simple to find your AGI if you've nearly completed, or have already filed your tax return. It is located directly on the return! You can locate your AGI on line 37 of the 2007 Form 1040, line 21 of the 2007 Form 1040A, or line 4 of 2007 Form 1040EZ.
Some tax benefits are dependent not on your AGI, but on your MAGI, or modified adjusted gross income, which is just your AGI with certain deductions added back in. Unlike your AGI, you may have several MAGIs, depending on which deductions you are required to include in order to receive a benefit. For example, your MAGI for the student loan interest deduction is your AGI added to the amount you deducted for tuition and fees, foreign earned income, and other foreign income and expenses.
First, you need to do the math and figure out what your approximate AGI and MAGI will be. Once you do that, discerning which tax benefits can be yours is simple. If your AGI is too high or too low, you might not be able to get a specific credit. But many other times it will prove to be exactly right!
It is not hard to calculate your adjusted gross income. The calculation simply requires that you take all of your income reported and subtract your deductions. Legally, you can take the following as deductions from your total gross income.
Expenses related to employment including:
- Rent expenses and royalty expenses,
- Half of the self employment tax
- $250 of educator expenses
- Qualified expenses of performing artists and
- Any contributions to investments, savings plans or retirement plans
Deductible medical expenses include the cost of health insurance for the self employed, contributions to Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (MSAs).
Deductible investment expenses include the interest lost by withdrawing CDs before they mature and up to $3000 of capital losses each year.
Business Expenses
-General business expenses
-Domestic production activities deduction
-Net operating losses (NOLs)
Educational Expenses
-Student loan interest up to $2,500
-Tuition and fees up to $4,000
-Travel expenses from attending National Guard or military reserve meetings more than 100 miles from home
Other Expenses
-Jury duty pay turned over to your employer
-Legal fees for illegal discrimination claims
-Moving expenses
-Unemployment benefits repaid because of trade readjustment allowances
It is very simple to find your AGI if you've nearly completed, or have already filed your tax return. It is located directly on the return! You can locate your AGI on line 37 of the 2007 Form 1040, line 21 of the 2007 Form 1040A, or line 4 of 2007 Form 1040EZ.
Some tax benefits are dependent not on your AGI, but on your MAGI, or modified adjusted gross income, which is just your AGI with certain deductions added back in. Unlike your AGI, you may have several MAGIs, depending on which deductions you are required to include in order to receive a benefit. For example, your MAGI for the student loan interest deduction is your AGI added to the amount you deducted for tuition and fees, foreign earned income, and other foreign income and expenses.
First, you need to do the math and figure out what your approximate AGI and MAGI will be. Once you do that, discerning which tax benefits can be yours is simple. If your AGI is too high or too low, you might not be able to get a specific credit. But many other times it will prove to be exactly right!
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