Need Some Deductions for 2011?

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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Business Deductions Claimed on Form 1040 Instead of Schedule C

Business Expenses Claimed on Form 1040 Instead of Schedule C

Certain business-related expenses must be deducted directly on Form 1040 instead of Schedule C.

Line 27 - Deduction for Part of Self-Employment Tax:

UPDATE:

For 2011, the employee's share of social security tax was reduced 2%, to 4.2% (.042). As of this writing, this reduction was also extended for two months in 2012.

Figuring Your Self-employment Tax Deduction

You're normally allowed to deduction 50% of self-employment tax as an above-the-line deduction (line 27 of Form 1040).

However, because of the 2% reduction in the social security tax for employees for 2011, a self-employed person must perform a special computation to figure the self-employment tax deduction.

If self-employment tax is $14,204.40 or less, multiply the amount by 57.51% to figure your self-employment tax deduction, which is entered on page one of Form 1040.
If self-employment tax is more than $14,204.40, multiply the tax by 50% and add $1,067 to the result to get your deduction.

Line 28 - Deduction for SEP, SIMPLE, and Qualified plans:

Self-employed persons-

If the plan includes you as a self-employed person, enter contributions made for yourself on Form 1040, line 28 (Form 1040 instructions) or Form 1040NR, line 27, not on Schedule C.
Form 5500-EZ:
- Form 5500-EZ is used for a one-participant plan. This is a plan that covers only you (or you and your spouse).

Line 29 - Self-Employed Health Insurance Deduction:

If you are self-employed and made contributions to a health insurance plan for yourself, your spouse, and dependents, do not enter your contributions on Schedule C.

You may be able to deduct such premiums on Form 1040, Line 29 (or Form 1040NR, Line 28).

Line 35 - Domestic Production Activities Deduction:

The purpose of this deduction is to encourage manufacturing or other production activities in the U.S. It is also referred to as the manufacturer's deduction.

Figure the deduction on Form 8903
Enter the deduction on Form 1040, Line 35.

The deduction for 2011 is 9% of the lower of:

Net income from qualified production activities or
Adjusted gross income.

The deduction for 9% of qualified production activities income cannot exceed adjusted gross income for:

Sole proprietors
Owners of partnerships, limited liability companies, or S-corporations
- A taxable income limitation applies to C corporations.

The deduction also cannot exceed 50% of W-2 wages paid during the year to employees.

Include wages related to production and non-production activities to figure the 50% limitation.

In addition to traditional manufacturing, qualified activities include:

Selling, leasing, or licensing items manufactured, produced, grown, or extracted in the U.S.
Selling, leasing, or licensing films produced in the U.S.
Construction in the U.S. Construction includes both erection and substantial renovation of residential and commercial buildings.
Engineering and architectural services relating to a construction project performed it he U.S.
Software developed in the U.S. regardless of whether it is to be purchased off the shelf or downloaded from the Internet.

Schedule C

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Need Some Deductions for 2011?

Business Deductions Claimed on Form 1040 Instead of Schedule C

Business Expenses Claimed on Form 1040 Instead of Schedule C

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