Exploring the longer tax forms opens up opportunities for deductions and credits that are not available to those filing the EZ form. A breakdown of each of the three 2016, 2017 IRS 1040 tax forms below will help you decide which to use.
There are conditions that apply to determine your ability to file a 1040EZ form. The IRS doubled the income threshold for filing this form – making it an option for more taxpayers.
The main conditions include:
- Filing status of married filing jointly or single only
- Under age 65, including jointly filed returns. Birthdays on January 1 constitute as becoming age 65 before the end of the year, making you ineligible to use the 1040EZ.
- No one on the return was legally blind
- You have no dependents
- Interest income less than a $1,500 threshold
- Individual or combined income less than $100,000
The benefit of this form is that it is only a single page but it excludes the ability to calculate many of the available credits and deductions. You are limited to only being able to claim one type of credit, the Earned Income Tax Credit (EITC). The EITC was put in place to assist those with lower income levels.
The 1040A also comes with income caps. It was increased, making it an option for a wider range of taxpayers. There are no restrictions on filing status with this form. The EITC can be claimed on this form.
Other credits available to 1040A filers are:
- Child Tax Credit
- Additional Child Tax Credit
- Education credits
- Dependent care credits
- Elderly/disabled care credits
- Retirement savings credits
Your taxable income, either as an individual or married person filing jointly, cannot exceed $100,000 to use the 1040A form. This form can also be used if you have no itemized deductions and have capital gains distributions without losses or additional capital gains.
Above-the-line deductions are available to those filing the 1040A form. These are claimed just before the last line of the form where the adjusted gross income (AGI) is listed. When you are able to reduce your AGI, your taxable income is decreased making your tax liability lower.
The adjustments permitted on the above-the-line deductions section include educator expenses, student loan interest, and some IRA contributions. Some tuition and fees for college expenses may also be deducted here.
When you have income exceeding $100,000, Form 1040 is the right option. You can use this form to itemize deductions and claim complex investments along with reporting varying types of income. Additional tax forms will also need to be completed in these situations.
The long form (Form 1040) has options for additional credits that you may qualify for. Some of the items available to those using the 1040 are credits/deductions for taxes paid to foreign countries and credits to assist with adoption costs.
Over one dozen above-the-line deductions can be claimed on Form 1040. These credits reduce your AGI and taxable income. Additional deductions for alimony payments made, some moving expense situations, and paying self-employment taxes are available on this form. Some of these tax breaks require a separate form to be completed.
The deductions mentioned above are located on the bottom of the first page of Form 1040.
Form 1040 should be used if:
- Individual or combined income exceeds $100,000
- Deductions are itemized
- Self-employment income exists
- Property sale income exists
If you still have questions regarding which form to use, view IRS Publication 17 for additional information. It details special circumstances and provides examples to help you determine the right form for your situation.
There are no rules stating that you must use the same form every tax year. Your situation can change at any time, which would require you to file with a different form. Not filing with the right form can end up costing you money from missed deductions and credits.