Dependency, Filing Status, and Income Documents
Adjustments to Income
Taxpayers can subtract certain expenses, payments, contributions, fees, etc. from their total income. The adjustments, subtracted from total income on Form 1040, establish the adjusted gross income (AGI). Adjustments may or may not be entered on a tax form, so you will need to follow up with the taxpayer to verify certain adjustments to income.
Eligible educators can deduct up to $250 of qualified expenses paid during the tax year. If the taxpayer and spouse are both eligible educators, they can deduct up to $500, but neither can deduct more than their own expenses up to $250. Educators who are eligible must meet the following requirements:
• Must be a teacher, instructor, counselor, principal, or aide in a school. Cannot be a
home school educator.
• Must be a K-12 educator. Daycare, Pre-K, and Higher Education educators do not qualify
• Must have been employed for at least 900 hours during the school year? (At least half the year)
Qualified Expenses for Educators
Expenses that qualify include books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. The educator’s own professional development expenses related to the curriculum in which the educator provides instruction are also included. Qualified expenses don’t include expenses for homeschooling or for nonathletic supplies for courses in health or physical education. Additionally, these expenses must have been out of pocket and not reimbursed by their education institution.
Taxpayers who were divorced before 2019 and paid alimony to a spouse during the year may claim an adjustment for the amount of alimony paid. The taxpayer will need to record the total amount paid during the year and will need the Social Security Number of the individual they paid the alimony to. Taxpayers who paid alimony and were divorced after 2019 will not be eligible for this adjustment.
Student Loan Interest
Individuals who paid student loans during the year may be eligible to deduct the amount of interest paid as an adjustment, up to $2,500. This amount of student loan interest paid during the year will be recorded on a Form 1098-E.
Tuition and Fees
Taxpayers can deduct up to $4,000 in qualified tuition and related expenses paid during the tax year as
an adjustment to gross income. The amount of the deduction is determined by the taxpayer’s filing status,
modified adjusted gross income (MAGI), and other factors. While a taxpayer may be eligible for this deduction, it will often be more beneficial for them to claim an education credit, which we will discuss in the next course.
Charitable Deductions (2020 Returns Only)
Taxpayers who do not itemize deductions to deduct up to $300 of cash contributions to charitable organizations per return.