You subtract adjustments to income from total income to arrive at Adjusted Gross Income. You make these adjustments on form 1040 from line 24 to 30.

  1. Moving Expenses: You may deduct limited amount of moving expenses that are related to your job if you meet distance test and time test.

Distance Test: Your new job location is at least 35 miles away from your old job location.

Time Test: If you are an employee you must work full time for at least 39 weeks during the first twelve months after arriving in general area of your new job. If you are self employed, in addition to the time test for employees you must work for a total of 78 weeks during the 24 month period. Use form 3903 to take this deduction.

  1. Employee Business

Expenses: If you are an employee and have travel, transportation, entertainment and gift expenses related to your work. You may use form 2106 to take this deduction.

  1. IRA deduction: Anyone who has compensation is eligible to set up tax deductible IRA (Individual Retirement Account) compensation includes wages, salaries,

commissions, tips, professional fees, bonuses and other amounts you receive for providing personal services. You can contribute up to $2,000 of your compensation for yourself and additional 250 for nonworking spouse. If you contribute to spousal IRA you can deposit $2,250 in both accounts, up to a maximum of 2,000 in any one account. If you withdraw from this account before age 5914 you will have to pay a penalty of 10%. 4. Your contributions to Keogh retirement plan are tax deductible.

  1. The penalty you pay on early withdrawal of savings is tax deductible.
  2. Alimony: Payments you make under a court decree of divorce or separation are included in the income of your spouse or former spouse and may be deductible by you if they are periodic instead of a lump sum and made during a tax year after the agreement is put into effect.
  3. Deduction for a Married Couple When Both Work: To take this deduction both you and your spouse must file a joint tax return and each of you must have earned income that qualifies for the deduction. The deduction is 10% of the power income spouse up to a maximum of $30,000. Use schedule W to get this deduction.

Article extracted from this publication >> March 22, 1985