FAQ: What are above-the-line deductions? Presti & Naegele Presti & Naegele
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What is the above line deduction?
Above-the-line deductions are those that are deducted from your gross income to calculate your adjusted gross income. Some of the most common above-the-line deductions that taxpayers take include retirement contributions, student loan interest, healthcare expenses, and business expenses.
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What Are the Most Common Deductions that Are Above-the-Line?
With a lower AGI, you may qualify for a larger itemized medical deduction. Amounts you paid to your spouse or a former spouse under a divorce or separation decree that qualify as alimony for tax purposes are deductible here. Other above-the-line deductions include job-related moving expenses and interest payments on student loans. Our office can help you make the most of the various above-the-line adjustments to income on your 2014 tax return. Above-the-line deductions are generally more advantageous for a high income taxpayer than so-called below-the-line deductions. Below-the-line deductions are subtracted from a taxpayer’s adjusted gross income.
A tax break might provide that a deduction of $50,000 may begin to phase out dollar for dollar when your AGI is at least $250,000. As a result, no deduction would be allowed if your AGI is $300,000 or higher. That’s where all the pieces will be combined to land on your final AGI for the year. If you divorced before and are still paying alimony, https://accounting-services.net/how-much-do-bookkeeping-services-cost-for-small/ your payments are an above-the-line deduction. (For the recipient, that alimony is taxable income.) If you were divorced on or after Jan. 1, 2019, you can’t deduct your alimony payments, and the recipient doesn’t have to pay taxes on them. Above-the-line deductions are used to calculate your adjusted gross income, which is the line.
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For instance, if you’re claiming medical expenses, you can only deduct the amount that exceeds your adjusted gross income (AGI) by 7.5%. While the TCJA law made changes to itemized deductions, it left most of the above the line deductions untouched. These deductions are adjustments to income and help get your total gross income to a smaller adjusted gross income, known as AGI.