Some taxpayers know right away whether they’ll be itemizing their deductions when it comes time to file, but for many, taking the standard deduction just makes more sense. The 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction when it was signed into law two years ago. For the 2019 tax year the standard deduction is up to $12,200 on single returns and $24,400 for joint filers, so even those who have itemized their deductions prior to 2017 may find taking the standard deduction is now the better option.
While you can’t claim the standard deduction and itemize, there is a third option that can further reduce your tax burden: You may qualify for one or more of several “above-the-line” deductions. These are technically adjustments to your income and can help reduce your tax bill even further.
Tax mistakes can be costly, especially if you don’t take advantage of tax savings available to you. If you want to make sure you’re getting the most amount back as a refund as possible or paying only what you’re obligated to pay, here are eleven deductions you can take without having to itemize.
11 tax deductions you can take without itemizing
Above-the-line tax deductions get their name from where they were found on the old Form 1040 — just above the line where your adjusted gross income (AGI) is recorded. However, after the 2017 tax reform, above-the-line deductions are now included on the 1040 Schedule 1 form.
The following above-the-line deductions can help lower your tax bill even if you take the standard deduction.
1. Educator expenses
Teachers, instructors, counselors, aides, and principals can deduct up to $250 of unreimbursed expenses. If you’re married to another educator and you file jointly, you can deduct up to $500. To claim the above-the-line deduction for educator expenses, you must have worked at least 900 hours in a school year at a school that provides elementary or secondary education.
If you’re an educator that qualifies for this deduction, you’ll need to submit Schedule 1 along with your Form 1040. You can enter this expense amount on Line 10.
2. Business expenses
Members of the National Guard and Reserves, qualified performing artists, fee-based state or local government officials, or employees with impairment-related work expenses can deduct certain business expenses from their taxes.
If you’re an Armed Forces reservist, you can deduct expenses for traveling 100 miles or more from home for performing your service. Fee-based state or local government officials and qualified performing arts can deduct job-related expenses. Lastly, if you’re a disabled employee with impairment-related work expenses, you can deduct expenses for attendant care at your place of employment.
If you qualify for any of these deductions, you’ll need to file Form 2106 and attach it to your Form 1040.
3. Health Savings Account contributions
If you’re covered under a high-deductible health plan (HDHP) and fund a Health Savings Account (HSA), smart move. Withdrawals are tax-free, provided you use the money to pay for qualified medical expenses, and your after-tax contributions are deductible so they lower your tax bill. If your contributions are deducted from your paycheck, they’re made with pre-tax dollars.
However you made your contributions, you need to file Form 8889 with your return. The maximum contribution for individual coverage for 2019 is $3,500. For family coverage, it’s $7,000. If you’re 55 or over at any time in the year, you can contribute another $1,000.
4. Moving expenses if you're an active duty service member
The deduction of certain moving expenses was suspended for nonmilitary taxpayers with the Tax Cuts and Jobs Act, but still exists for certain servicemembers. In order to qualify, you must be an active duty member of the military and move due to a permanent change of duty station — whether it’s a move to your first duty station, from one permanent post to another, or a move from your last duty station back home.
If you qualify, the unreimbursed moving expenses include moving your household items and traveling (including lodging but not meals) to your new home. You can deduct your unreimbursed moving expenses using Form 3903, which gets attached to your tax return.
5. Self-employment tax
Self-employment taxes can be eye-opening if you’re filing your business tax forms for the first time. If you’re self-employed, you have to pay both the employer and the employee share of Social Security and Medicare taxes. This is a whopping 15.3% of net self-employment income — 12.4% for Social Security and 2.9% for Medicare.
Luckily, you can deduct half (the employer-equivalent portion) of your self-employment tax. This won’t reduce how much self-employment tax you owe, but it can help reduce income taxes. When you file, attach Schedule SE to your return.
6. Self-employed retirement contributions
Self-employed individuals can reduce their tax bill even further by socking away money in a SEP-IRA or a SIMPLE IRA. If you contribute to a SEP-IRA, you can deduct your contributions made to these accounts as an adjustment to income, up to the lesser of $56,000 for 2019 or 25% of your compensation. The amount you can contribute to a SIMPLE IRA cannot exceed $13,000 in 2019.
If you’re self-employed and want higher contribution limits and a bigger tax advantage, a SEP-IRA over a Traditional IRA might be the way to go.
7. Self-employed health insurance deduction
If you’re self-employed, you may be eligible to deduct premiums you paid on a health insurance policy covering medical care, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. This is an adjustment to income, so you claim it on Schedule 1 and attach it to your Form 1040.
8. Early withdrawal of savings penalty
Did you withdraw funds from a Certificate of Deposit (CD) or other time-deposit account before maturity and get hit with a bank penalty? The good news is that you can deduct the full amount of the penalty on Form 1040. You’ll just need to attach Schedule 1. The amount can be added to Line 17.
You can write off the alimony payments you made to a spouse or ex-spouse as long as your divorce or separation agreement was in place before Dec. 31, 2018. This deduction goes away if the agreement is modified after Dec. 31, 2018, and if the modification does two things: changes the terms of the alimony payment and states the payment is not deductible by the spouse who pays or included in the income of the spouse who receives the payment.
When filing, you must provide your spouse’s Social Security number as well or your deduction may be disallowed and you may be charged a $50 penalty. This amount goes on Schedule 1 and is attached to Form 1040.
10. Individual Retirement Account contributions
Contributing to a traditional Individual Retirement Account (IRA) gives you two wins: It boosts your retirement savings while trimming your tax bill. The contribution limit is $6,000 ($7,000 if you're age 50 or older) for 2019. If you or your spouse are covered by a retirement plan at work and your income exceeds certain levels, the deduction may be limited. If not, you can deduct every penny you contribute from your income.
You can make 2019 IRA contributions until April 15, 2020.
11. Student loan interest
If you made payments toward your student loans, you can deduct up to $2,500 of interest you paid during the year. There are some important income limits to be aware of, though, as not everyone will be eligible to deduct their student loan interest.
If you’re single, you’re not eligible if your modified adjusted gross income (MAGI) is more than $85,000. If you’re married filing a joint return, you’re not eligible if your MAGI is $170,000 or more. For married couples filing separately, you can’t claim the deduction at all.
You don’t have to itemize your deductions to qualify for certain tax breaks. You can lower your tax bill if you qualify for any of these above-the-line deductions that you can take along with your standard deduction.
Keep this in mind as you’re preparing to file so you can ensure you receive the largest tax refund as possible. Or if you owe money to the IRS, you can at least make sure you’re only paying the taxes you’re legally obligated to pay.