- You are allowed to claim a personal exemption for yourself unless you are claimed as a dependent on someone else's tax return. If you are married and file a joint return, you can also take a personal exemption for your spouse. Each dependent adds an additional exemption. For the 2010 tax year, each personal exemption you claim is worth $3,650.
- In order to claim deductions, you cannot use the Form 1040 EZ to file your taxes. If you only take certain above-the-line deductions, you may be able to use Form 1040-A. If you choose to itemize your deductions, you cannot claim the standard deduction. About one-third of taxpayers choose to itemize their deductions. You should forgo the standard deduction and itemize if the total of your itemized deductions exceeds the standard deduction you are allowed. You must use Form 1040, along with 1040 Schedule A, to itemize. Be prepared to support your claims with documentation in case you are audited.
- To claim alimony payments as an above-the-line deduction, the IRS mandates the payments be required in a divorce or separation agreement and that the payment is not designated as anything other than alimony (nor can the payments be treated as child support); the ex-spouse paying the alimony cannot file a tax return with the recipient ex-spouse; alimony payments must be made in cash, check or money order; divorced or separated spouses cannot live in the same household; the alimony payments must cease after the death of the recipient ex-spouse. All qualified alimony payments are eligible to claim on your taxes -- just make sure to provide the total amount of alimony paid and your ex-spouse's Social Security number. Returns submitted without the recipient ex-spouse's Social Security number are subject to a $50 penalty and possible disallowance of the above-the-line deduction.
- Interest that you pay on loans taken out to finance your education is deductible as an above-the-line deduction. In order to qualify in 2010, your adjusted gross income must be below $75,000 if you file a single return, or $150,000 if you file a joint return. The interest deduction is limited to $2,500. You cannot claim this deduction if your filing status is married filing separately.
- If you are self-employed, you can deduct half of the total you pay in self-employment taxes as an above-the-line deduction. This deduction is to compensate self-employed individuals because they are responsible for paying the entire 2010 tax-year-rate of 15.3 percent of FICA taxes, instead of paying 7.65 percent and their employer paying 7.65 percent. In 2011, the self-employment tax is reduced to 13.3 (5.65 employee contribution plus 7.65 employer portion). If you are self-employed, you can also deduct the cost of health insurance for you and your family as an above-the-line deduction.
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