Tax Credits and Tax Deductions - Qualification Limits

If you've ever stooped through a short door or tried to reach a book off the top shelf you know how uncomfortable it is to be the wrong size. The same thing is true with taxes - many tax benefits are only available to families and individuals whose AGI (adjusted gross incomes) or MAGI (modified adjusted gross income) falls within certain limits.

It's not hard to figure your adjusted gross income (or AGI). Just add up all the income you claim on your tax return, called your "gross income," then subtract any deductions (called "adjustments"). The remaining amount is your adjusted gross income. Here is a list of some expenses you can safely deduct from your gross income:

Expenses Associated With Employment:
- 50% of self-employment taxes
- Cost of rent and royalties
- Any qualifying expenses relating to the performing arts
- Up to $250 of expenses, if you are an educator
- Money paid into qualified savings, investment, and retirement accounts

Medical expenses can include: MSA's or Archer Medical Savings Accounts, funds contributed to Health Savings Accounts, and health insurance for those who are self employed.

Expenses related to investments include: any capital loss up to a maximum of $3000, and any interest lost due to withdrawing CD's before they fully mature.

Business expenses include; general business expenses, deduction for domestic production activities, net operating losses (NOLs).

Educational expenses are; student loan interest (up to $2,500), tuition and fees (up to $4,000), and travel expenses from attending meetings for National Guard or military reserve which are more than 100 miles from home.

Other expenses
- Jury duty pay that you gave to your employer
- Any fees related to legal expenses due to illegal discrimination claims
- Expenses related to moving to a new home and
- Unemployment income that was repaid due to trade readjustment allowances.

If you have already completed, or almost completed, your income tax return, it is easy to find your adjusted gross income. It is on your return! Your AGI is on line 37 of the 2007 Form 1040, line 21 of the 2007 Form 1040A, and line 4 of the 2007 Form 1040EZ.

Tax benefits are not always dependent on your adjusted gross income. Sometimes these benefits rely on another calculation called the MAGI, or modified adjusted gross income. The MAGI is calculated by adding some deductions to your AGI. Because you need to include particular deductions to qualify for a benefit, you can have more than a single MAGI. One example of a MAGI can be seen in the calculations for the student loan interest deduction. This MAGI is calculated by adding your AGI, the tuition and fees deduction and various foreign incomes and expenses.

Before choosing which tax benefits you qualify for, you'll want to first determine your AGI and MAGI. Doing this makes it easier to determine for which tax benefits you qualify. Occasionally your AGI will be too high to claim a certain credit. Plus, it may even be too low. But, there are going to be other times when your AGI is just right!

The adjusted gross income (AGI) and the modified adjusted gross income (MAGI) of a family or individual are major factors that can determine tax benefit eligibility. Having an AGI or MAGI that's out of range can cause denial of certain tax benefits. This can create the same feeling of frustration you get when you can't perform a simple physical task simply because you're too big or too small.

Learn How to Deduct Commute Mileage and other hidden Tax Credits that can save you tons of money. Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. I hope you enjoyed learning how to maximize your qualification limits on tax credits and deductions Enjoy more of his Income Tax Articles at Free-Reprint-Articles.com

Article Source: http://www.positivearticles.com. PositiveArticles.Com does not vouch for or necessarily endorse the contents of this article.

If you are copying this article for publishing on a website or ezine, please use the "Ezine Ready" button from the righthand menu.

Article Search

Home

	Print This Article
	Add To Favorites
	Ezine Ready