Deductive Reasoning: How to Get the Most From Tax Deductions

Classroom expenses. Another new (if somewhat limited) above-the-line deduction provides some relief for elementary and high school teachers who buy their own teaching materials and supplies. Teachers can deduct up to $250 for the cost of books, supplies, computer equipment and other supplementary materials used in the classroom. To qualify, you must be a teacher, counselor or principal in an elementary or secondary school for at least 900 hours during the school year.

Individual Retirement Accounts. This one should come as no surprise -- if you're eligible for a deductible IRA, the money you contribute (up to $3,000 in 2002; $3,500 if you're age 50 or older) can be deducted from your taxable income even if you don't itemize. Anyone not covered by a retirement plan at work (that means you're not eligible to participate, not that you simply don't) can contribute to a deductible IRA, regardless of income. (If you work but your spouse doesn't, you can contribute up to $3,000 on their behalf as long as your income is $150,000 or less.) But if your company offers a retirement plan, the amount you can contribute to a deductible IRA starts to get limited when your AGI exceeds $34,000 if you're single, $54,000 for married couples. Your ability to contribute anything to a deductible IRA gets wiped out when your income hits $44,000 for singles, $64,000 for married couples.

Alimony. Alimony is deductible in the year in which it's paid. While the deduction also includes any back alimony, it does not include child support or other property settlements.

Moving expenses. If you have to move because of a job, you can write off your moving expenses without itemizing. Your new job (or new location for an existing job) must be at least 50 miles farther from your former home than your former job. And only out-of-pocket expenses are deductible -- if your employer pays for your move, no deduction is allowed.

Next up: What you need to know about itemizing.

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