Line 23 - Educator Expenses

If you were an eligible educator in 2004, you can deduct up to $250 of qualified expenses you paid in 2004. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary.

Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.

• Excludable U.S. series EE and I savings bond interest from Form 8815.
• Nontaxable qualified state tuition program earnings.
• Nontaxable earnings from Coverdell education savings accounts.
• Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2.

For more details, use TeleTax topic 458 (see page 8).

Line 24 - Certain Business Expenses of Reservists, Performing Artists, and Fee-Basis Government Officials

Include the following deductions on line 24.

• Certain business expenses of National Guard and reserve members who traveled more than 100 miles from home to perform services as a National Guard or reserve member.
• Performing-arts-related expenses as a qualified performing artist.
• Business expenses of fee-basis state or local government officials. For more details, see Form 2106 or Form 2106-EZ.

Line 25 - IRA Deduction

If you made any nondeductible contributions to a traditional individual retirement arrangement (IRA) for 2004, you must report them on Form 8606.

If you made contributions to a traditional IRA for 2004, you may be able to take an IRA deduction. But you, or your spouse if filing a joint return, must have had earned income to do so. For IRA purposes, earned income includes alimony and separate maintenance payments reported on line 11. A statement should be sent to you by May 31, 2005, that shows all contributions to your traditional IRA for 2004.

Use the worksheet on page 27 to figure the amount, if any, of your IRA deduction. But read the following list before you fill in the worksheet.

• If you were age 70½ or older at the end of 2004, you cannot deduct any contributions made to your traditional IRA for 2004 or treat them as nondeductible contributions.
• You cannot deduct contributions to a Roth IRA. But you may be able to take the retirement savings contributions credit. See the instructions for line 50 on page 36.

If you made contributions to both a traditional IRA and a Roth IRA for 2004, do not use the worksheet on page 27. Instead, see Pub. 590 to figure the amount, if any, of your IRA deduction.

• You cannot deduct elective deferrals to a 401(k) plan, section 457 plan, SIMPLE plan, or the federal Thrift Savings Plan. These amounts are not included as income in Form W-2, box 1. But you may be able to take the retirement savings contributions credit. See the instructions for line 50 on page 36.
• If you made contributions to your IRA in 2004 that you deducted for 2003, do not include them in the worksheet.
• If you received a distribution from a nonqualified deferred compensation plan or nongovernmental section 457 plan that is included in Form W-2, box 1, do not include that distribution on line 8 of the worksheet. The distribution should be shown in Form W-2, box 11. If it is not, contact your employer for the amount of the distribution.
• You must file a joint return to deduct contributions to your spouse’s IRA. Enter the total IRA deduction for you and your spouse on line 25.
• Do not include qualified rollover contributions in figuring your deduction. Instead, see the instructions for instructions for lines 15a and 15b on page 22.
• Do not include trustees’ fees that were billed separately and paid by you for your IRA. These fees can be deducted only as an itemized deduction on Schedule A.
• If the total of your IRA deduction on line 25 plus any nondeductible contribution to your traditional IRAs shown on Form 8606 is less than your total traditional IRA contributions for 2004, see Pub. 590 for special rules.

By April 1 of the year after the year in which you turn age 70 1/2, you must start taking minimum required distributions from your traditional IRA. If you do not, you may have to pay a 50% additional tax on the amount that should have been distributed. For details, including how to figure the minimum required distribution, see Pub. 590.

Were You Covered by a Retirement Plan?

If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc.) at work or through self-employment, your IRA deduction may be reduced or eliminated. But you can still make contributions to an IRA even if you cannot deduct them. In any case, the income earned on your IRA contributions is not taxed until it is paid to you.

The "Retirement plan" box in Form W-2, box 13, should be checked if you were covered by a plan at work even if you were not vested in the plan. You are also covered by a plan if you were self-employed and had a SEP, SIMPLE, or qualified retirement plan.

If you were covered by a retirement plan and you file Form 2555, 2555-EZ, or 8815, or you exclude employer-provided adoption benefits, see Pub. 590 to figure the amount, if any, of your IRA deduction.

Married persons filing separately. If you were not covered by a retirement plan but your spouse was, you are considered covered by a plan unless you lived apart from your spouse for all of 2004.

• IRA Deductions Worksheet--Line 25

Line 26 - Student Loan Interest Deduction

You can take this deduction only if all of the following apply.

• You paid interest in 2004 on a qualified student loan.
• Your filing status is any status except married filing separately.
• Your modified adjusted gross income (AGI) is less than: $65,000 if single, head of household, or qualifying widow(er); $130,000 if married filing jointly. Use lines 2 through 4 of the worksheet below to figure your modified AGI.
• You are not claimed as a dependent on someone's (such as your parent's) 2004 tax return.

You can take this deduction only if all of the following apply.

• You paid interest in 2004 on a qualified student loan (see below).
• Your filing status is any status except married filing separately.
• Your modified adjusted gross income (AGI) is less than: $65,000 if single, head of household, or qualifying widow(er); $130,000 if married filing jointly. Use lines 2 through 4 of the worksheet below to figure your modified AGI.
• You are not claimed as a dependent on someone’s (such as your parent’s) 2004 tax return.

Use the worksheet below to figure your student loan interest deduction.

Exception. Use Pub. 970 instead of the worksheet below to figure your student loan interest deduction if you file Form 2555, 2555-EZ, or 4563, or you exclude income from sources within Puerto Rico.

A qualified student loan is any loan you took out to pay the qualified higher education expenses for yourself, your spouse, or anyone who was your dependent when the loan was taken out. The person for whom the expenses were paid must have been an eligible student (see below). However, loan is not a qualified student loan if (a) any of the proceeds were used for other purposes, or (b) the loan was from either related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such plan. To find out who is a related person, see Pub. 970.

Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools. You must reduce the expenses by the following benefits.

• Employer-provided educational assistance benefits that are not included in Form(s) W-2, box 1.
• Excludable U.S. series EE and I savings bond interest from Form 8815.
• Nontaxable qualified tuition program earnings.
• Nontaxable earnings from Coverdell education savings accounts.
• Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income.

For more details on these expenses, see Pub. 970.

An eligible student is a person who:

• Was enrolled in a degree, certificate, or other program (including a program of study abroad that was approved for credit by the institution at which the student was enrolled) leading to a recognized education. tional credential at an eligible educational institution, and
• Carried at least half the normal full-time workload for the course of study he or she was pursuing.

Student Loan Interest Deduction Worksheet--Line 26

Line 27 - Tuition and Fees Deduction

You can take this deduction only if all of the following apply.

• You paid qualified tuition and fees (see this page) in 2004 for yourself, your spouse, or your dependent(s).
• Your filing status is any status except married filing separately.
• Your modified adjusted gross income (AGI) is not more than: $80,000 if single, head of household, or qualifying widow(er); $160,000 if married filing jointly. Use lines 1 through 3 of the worksheet below to figure your modified AGI.
• You cannot be claimed as a dependent on someone’s (such as your parent’s) 2004 tax return.
• You are not claiming an education credit for the same student. See the instructions for line 49 on page 36.
• You were a U.S. citizen or resident alien for all of 2004 or you were a nonresident alien for any part of 2004 and you are filing a joint return.

Use the worksheet below to figure your tuition and fees deduction.

Exception. Use Pub. 970 instead of the worksheet below to figure your tuition and fees deduction if you file Form 2555, Form 2555-EZ, or Form 4563, or you exclude income from sources within Puerto Rico.

Qualified tuition and fees are amounts paid in 2004 for tuition and fees required for the student´s enrollment or attendance at an eligible educational institution during 2004. Tuition and fees paid in 2004 for an academic period that begins in the first 3 months of 2005 can also be used in figuring your deduction. Amounts paid include those paid by credit card or with borrowed funds. An eligible educational institution includes most colleges, universities, and certain vocational schools.

Qualified tuition and fees do not include amounts paid for the following amounts.

• Room and board, insurance, medical expenses (including student health fees), transportation, or other similar personal, living, or family expenses.
• Course-related books, supplies, equipment, and nonacademic activities, except for fees required to be paid to the institution as a condition of enrollment or attendance.
• Any course involving sports, games, or hobbies, unless such course is part of the student’s degree program.

Qualified tuition and fees must be reduced by the following benefits.

• Excludable U.S. series EE and I savings bond interest from Form 8815.
• Nontaxable qualified tuition program earnings.
• Nontaxable earnings from Coverdell education savings accounts.
• Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income.

For more details, use TeleTax topic 457 (see page 8) or see Pub.970.

You may be able to take a credit for your educational expenses instead of a deduction. See the instructions for line 49 on page 36 for details.

Line 28 - Health Savings Account Deduction

If contributions (other than employer contributions) were made to your health savings account for 2004, you may be able to take this deduction. See Form 8889.

Line 29 - Moving Expenses

If you moved in connection with your job or business or started a new job, you may be able to take this deduction. But your new workplace must be at least 50 miles farther from your old home than your old home was from your old workplace. If you had no former workplace, your new workplace must be at least 50 miles from your old home. Use TeleTax Topic 455 (see page 8) or see Form 3903.

Line 30 - One-Half of Self-Employment Tax

If you were self-employed and owe self-employment tax, fill in Schedule SE to figure the amount of your deduction.

Line 31 - Self-Employed Health Insurance Deduction

You may be able to deduct the amount you paid for health insurance for yourself, your spouse, and your dependents if any of the following apply.

• You were self-employed and had a net profit for the year.
• You used one of the optional methods to figure your net earnings from self-employment on Schedule SE.
• You received wages in 2004 from an S corporation in which you were a more-than-2% shareholder. Health insurance benefits paid for you may be shown in Form W-2, box 14.

The insurance plan must be established under your business. But if you were also eligible to participate in any subsidized health plan maintained by your or your spouse´s employer for any month or part of a month in 2004, amounts paid for health insurance coverage for that month cannot

be used to figure the deduction. For example, if you were eligible to participate in subsidized health plan maintained by your spouse´s employer from September 30 through December 31, you cannot use amounts paid for health insurance coverage for September through December to figure your deduction.

For more details, see Pub. 535.

Note. If, during 2004, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA recipient, or Pension Benefit Guaranty Corporation pension recipient, you must complete Form 8885 before completing the worksheet below. When figuring the amount to enter on line of the worksheet below, do not include any health coverage tax credit advance payments shown in Form 1099-H, box 1. Also, subtract the amount shown on Form 8885, line 4, (reduced by any advance payments shown on line 6 of that form) from the total insurance premiums you paid.

If you qualify to take the deduction, use the worksheet below to figure the amount you can deduct.

Exception. Use Pub. 535 instead of the worksheet below to find out how to figure your deduction if any of the following apply.

• You had more than one source of income subject to self-employment tax.
• You file Form 2555 or 2555-EZ.
• You are using amounts paid for quali-fied long-term care insurance to figure the deduction.

• Self-Employed Health Insurance Deduction Worksheet--Line 29

Line 32 - Self-Employed SEP, SIMPLE, and Qualified Plans

If you were self-employed or a partner, you may be able to take this deduction. See Pub. 560 or, if you were a minister, Pub. 517.

Line 33 - Penalty on Early Withdrawal of Savings

The Form 1099-INT or Form 1099-OID you received will show the amount of any penalty you were charged.

Lines 34a and 34b - Alimony Paid

If you made payments to or for your spouse or former spouse under a divorce or separation instrument, you may be able to take this deduction. Use TeleTax Topic 452 (see page 8) or see Pub. 504.

Line 35

Include in the total on line 35 any of the following write-in adjustments. To find out if you can take the deduction, see the form or publication indicated. On the dotted line next to line 35, enter the amount of your deduction and identify it as indicated.

• Archer MSA deduction (see Form 8853). Identify as "MSA."
• Jury duty pay if you gave the pay to your employer because your employer paid your salary while you served on the jury. Identify as "Jury Pay."
• Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Identify as "PPR."
• Reforestation amortization and expenses (see Pub. 535). Identify as "RFST."
• Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see Pub. 525). Identify as "Sub-Pay TRA."
• Contributions to section 501(c)(18)(D) pension plans (see Pub. 525). Identify as "501(c)(18)(D)."
• Contributions by certain chaplains to section 403(b) plans (see Pub. 517). Idenzero. tify as "403(b)."
• Attorney fees and court costs paid after October 22, 2004, for actions settled or decided after that date involving certain unlawful discrimination claims, but only to the extent of gross income from such actions (see Pub. 525). Identify as "UDC."
• Deduction for clean-fuel vehicles. If you placed a qualified clean-fuel vehicle in service in 2004, you can deduct $2,000 on line 35 if you did not use the vehicle in your business (other than as an employee). Identify this deduction on line 35 as "Clean-Fuel."

If you used a qualified clean-fuel vehicle or other clean-fuel vehicle property in your business (other than as an employee), claim the business portion of the deduction on the applicable line of Schedule C, E, or F.

There are higher deduction amounts for heavy trucks, vans, and buses.

A qualified clean-fuel vehicle:

1. Must be acquired new and for your own use.
2. Must satisfy any federal and state emissions standards.
3. Is designed to be propelled by a clean-burning fuel, such as natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, or electricity.

A qualified clean-fuel vehicle includes certain gasoline-electric hybrid vehicles such as the Honda Insight, Honda Civic Hybrid, and Toyota Prius. It does not in-clude electric vehicles.

You may be able to take a credit if you placed a new electric vehicle in service in 2004. See Form 8834 for details.

You may also be able to take this deduc-tion for certain new property installed on a motor vehicle to enable it to be propelled by a clean-burning fuel.

For more details, see Pub. 535.

Line 36

If line 36 is less than zero, you may have a net operating loss that you can carry to another tax year. See the Instructions for Form 1045 for details.

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