Topic #10 – 2011 Form 1040 Exclusive – Adjusted Gross Income Part I

 Line 23 – Educator expenses

If you were an eligible educator in 2010, you can deduct on line 23 up to $250 of qualified expenses you paid in 2010. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses on line 23. You may be able to deduct expenses that are more than the $250 (or $500) limit on Schedule A, line 21. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year.

Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education.

You must reduce your qualified expenses by the following amounts.

1. Excludable U.S. series EE and I savings bond interest from Form 8815.

2. Nontaxable qualified tuition program earnings or distributions.

3. Any nontaxable distribution of Coverdell education savings account earnings.

4. Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2.

For more details, use Tele Tax topic 458 or see Pub. 529.

Line 24 – Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ

Include the following deductions on line 24.

1. Certain business expenses of National Guard and reserve members who traveled more than 100 miles from home to perform services as a National Guard or reserve member.

2. Performing-arts-related expenses as a qualified performing artist.

3. Business expenses of fee-basis state or local government officials. For more details, see Form 2106 or 2106-EZ.

Line 25 – Health savings account deduction. Attach Form 8889

You may be able to take this deduction if contributions (other than employer contributions, rollovers, and qualified HSA funding distributions from an IRA) were made to your HSA for 2010. See Form 8889.

Line 26 – Moving expenses. Attach Form 3903

If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace. If you had no former workplace, your new workplace must be at least 50 miles from your old home. Use Tele Tax topic 455 or see Form 3903.

Line 27 – Deductible part of self-employment tax. Attach Schedule SE

If you were self-employed and owe self-employment tax, fill in Schedule SE to figure the amount of your deduction.

Line 28 – Self-employed SEP, SIMPLE, and qualified plans

If you were self-employed or a partner, you may be able to take this deduction. See  Pub. 560 or, if you were a minister, Pub. 517.

Line 29 – Self-employed health insurance deduction

You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents. Effective March 30, 2010, the insurance can also cover your child (defined on this page) who was under age 27 at the end of 2010, even if the child was not your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child .

One of the following statements must be true.

1) You were self-employed and had a net profit for the year.

2) You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.

3) You received wages in 2010 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

The insurance plan must be established under your business. Your personal services must have been a material income-producing factor in the business. If you are a more-than-2% shareholder in an S corporation, the plan must be established by the S corporation. A plan is established by the S corporation if (a) the S corporation makes the premium payments for the policy in 2010 or (b) you make the premium payments and furnish proof of payment to the S corporation and then the S corporation reimburses you for the premium payments in 2010. You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2010 and you also report the premium payments or reimbursements as wages on Form 1040, line 7. But if you were also eligible to participate in any subsidized health plan maintained by your or your spouse’s employer for any month or part of a month in 2010, amounts paid for health insurance coverage for that month cannot be used to figure the deduction. In addition, effective March 30, 2010, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2010, do not use amounts paid for coverage for that month to figure the deduction.

Example

If you were eligible to participate in a subsidized health plan maintained by your spouse’s employer from September 30 through December 31, you cannot use amounts paid for health insurance coverage for September through December to figure your deduction. Medicare Part B premiums can be used to figure the deduction. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. For more details, see Pub. 535.

Note

 If, during 2010, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation pension recipient, you must complete Form 8885 before completing the worksheet on page 28. When figuring the amount to enter on line 1 of the worksheet on page 28, do not include:

1. Any amounts you included on Form

2. Any qualified health insurance premiums you paid to “U.S. Treasury-HCTC,” or

3. Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. If you qualify to take the deduction, use the worksheet on page 28 to figure the amount you can deduct. Exception. Use Pub. 535 instead of the worksheet on page 28 to figure your deduction if any of the following applies.

4. You had more than one source of income subject to self-employment tax.

5. You file Form 2555 or 2555-EZ.

6. You are using amounts paid for qualified long-term care insurance to figure the deduction.

Next Up: Topic #11 – 2011 Form 1040 Exclusive – Adjusted Gross Income Part II