Above The Line Deductions

Posted on Tuesday, February 12, 2013

An above-the-line deduction is an adjustment to income (deduction) that can be taken regardless of whether the individual taxpayer itemizes deductions. The adjustment reduces the taxpayer's adjusted gross income (AGI). These adjustments are also sometimes called deductions from gross income, as opposed to itemized deductions that are deducted from AGI. An above-the-line deduction is taken out of income "above" the line on the tax form on which adjusted gross income is reported.

Above-the-line deductions are more desirable than itemized deductions because:

they are more available (for example, they are not phased out or subject to a floor like many itemized deductions);
they can be claimed even if the taxpayer does not itemize deductions; and
they lower the taxpayer's AGI, which can allow the taxpayer to qualify for more and/or larger deductions.
The above-the-line deductions include:

Trade or business expenses
Net operating loss deduction
Loss from sales and exchanges
Depreciation and depletion
Deductions tied to rents and royalties
Teacher's classroom expenses
Jury pay turned over to employer
Overnight travel expenses of Reserve or National Guard
Supplemental unemployment compensation repayments
Business expenses of qualifying performing artists
Contributions to individual retirement accounts
Student loan interest deduction
Tuition and fees deduction
Health savings account deduction
Moving expenses
½ of self-employment tax
Health insurance costs of the self-employed
Contributions to SIMPLE or SEP plans
Penalty for early withdrawal of funds from a savings account
Alimony payments
Legal fees and costs paid in certain actions involving civil rights violations or whistleblower awards
Domestic production activities deduction

Posted in Tax And Accounting Topics For Business

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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