It’s tax season once again. If filing your taxes is not yet on your mind, it soon will be. So let’s get this tax season underway by discussing something that can save you money in your dealings with the IRS, Above the Line Deductions.
Above the Line Deductions, so called because they appear on the tax form above the line where your Adjusted Gross Income (or AGI) is calculated, are deductions that the IRS allows to be taken into account in the AGI calculation. Since your AGI is used to determine your overall tax liability, Above the Line Deductions can have a larger impact on your tax situation than any deduction that occurs below the line.
A few examples of Above the Line Deductions include certain business expenses, contributions to traditional IRAs, alimony payments, interest on student loans, job-related moving expenses, contributions to health savings accounts, and several others. If you qualify to take an Above the Line Deduction it is in your benefit to do so. Not only will it impact your tax liability directly, it also might make you more easily qualify for a below the line deduction that you wouldn’t otherwise be able to take. For example, since the deduction for medical expenses, a below the line deduction, is subject to those expenses that are above 10% of your AGI. Since AGI is reduced by an Above the Line Deduction the result would be a lowered threshold for claiming medical expenses.
Another benefit to Above the Line Deductions is that it’s not necessary to itemize deductions on Schedule A in order to claim them. So they’re available to anyone, no matter how allergic you happen to be to extra schedules. For more information on Above the Line Deductions, please see IRS publication and remember to always consult a tax expert for tax advice appropriate to your specific situation.
If you qualify, you can claim above-the-line tax deductions even if you don't itemize.Click here to fill out the Above-the-line Tax Deductionsform
The line above the total is called the subtotal. It is referred to as above-the-line. It does not include deductions or taxes.
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
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Gross salary means the total salary BEFORE any deductions are taken, so the answer is no deductions.
If you qualify, you can claim above-the-line tax deductions even if you don't itemize.Click here to fill out the Above-the-line Tax Deductionsform
The line above the total is called the subtotal. It is referred to as above-the-line. It does not include deductions or taxes.
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
FIT, or Federal Income Tax, taxable wages are your total wages less deductions. To calculate taxable income, you subtract above the line and below the line deductions as indicated by your tax form.
When you file your taxes there is a line on the form for your standard deductions or on a different form you can itimize your deduction if that would give you more deductions
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Try the IRS website. IRS.GOV and type in "DEDUCTIONS" in their serach engine. You might want to be more specific about the deductions you are looking or, i.e. deductions for homeowners deductions for day care deductions for business etc....
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Try the IRS website. IRS.GOV and type in "DEDUCTIONS" in their serach engine. You might want to be more specific about the deductions you are looking or, i.e. deductions for homeowners deductions for day care deductions for business etc....
Try the IRS website. IRS.GOV and type in "DEDUCTIONS" in their serach engine. You might want to be more specific about the deductions you are looking or, i.e. deductions for homeowners deductions for day care deductions for business etc....