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What Is an Above-the-Line Tax Deduction?

By Maurie Backman - Updated Jun 30, 2017 at 4:44PM

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Above-the-line deductions offer the best of both worlds -- an opportunity to lower your taxes without having to itemize.

The IRS offers a number of tax deductions that can help workers shave thousands of dollars off their tax bills. But in order to take advantage of most deductions, you'll need to itemize on your return -- which can not only be time-consuming, but may not make financial sense when you consider your standard deduction. But thanks to above-the line tax deductions, you can benefit from certain tax breaks without having to go to the trouble of itemizing.

An above-the-line tax deduction is an adjustment to your gross income that you can take without actually itemizing. These deductions are listed on Form 1040, or Form 1040A, right above each form's last line where adjusted gross income, or AGI, is entered (hence the name).


Common above-the-line deductions

A tax deduction is a reduction of your taxable income. In practice, above-the-line deductions are really more like adjustments to your gross income. But like below-the-line deductions, they serve the very important purpose of lowering your taxable income.

Knowing which above-the-line tax deductions to take can help you reduce your tax bill. Here are some you might be eligible for:

  • Educator expenses. Teachers and school-system employees can deduct up to $250 per year for out-of-pocket school-supply expenses.
  • Moving expenses. If you moved for a job, you may be eligible to deduct expenses such as hiring movers and storage fees. You just need to meet two criteria. First, the distance between your old home and your new job needs to be at least 50 miles greater than what your previous commute to work entailed. Additionally, you must work for at least 39 weeks during the 52-week period after you move.
  • Self-employment tax. If you're self-employed, you're required to pay Social Security and Medicare taxes. But whereas companies typically pay their own share per employee, self-employed professionals are responsible for both portions. However, you can deduct half of what you pay on your tax return.
  • Alimony. If you're still making payments to a former spouse, you can deduct them on your return.
  • Student-loan interest. Depending on your income, you can deduct up to $2,500 a year in student-loan interest. For the current tax year, you're not eligible for the deduction if your AGI exceeds $80,000 as a single tax filer, or $160,000 as a couple filing jointly. Furthermore, the deduction begins to phase out for single filers whose AGI exceeds $65,000 and joint filers whose AGI exceeds $130,000.
  • Health savings accounts. A health savings account, or HSA, is a medical coverage plan that's similar to an individual retirement account (IRA). The money you put into an HSA can grow tax free, and you can take withdrawals to pay for eligible medical and dental expenses. You can claim an above-the-line deduction for money you put into an HSA.
  • IRA contributions. If you put money into a traditional IRA, you may be eligible to deduct that contribution from your income. The amount of this deduction, however, will depend on how much you put in, along with your AGI, and whether you or your spouse has the option to participate in an employer-sponsored retirement plan. If you have a SEP IRA, you may be eligible to deduct contributions, as well.
  • Health insurance for the self-employed. You're allowed to deduct the amount you spend on health insurance premiums on your taxes. This includes coverage for yourself, a spouse, and any dependents you have.

Nobody wants to fork over more money to the IRS than is necessary, so it pays to see what above-the-line deductions you're eligible to take. The more you're able to claim, the less you'll lose to taxes.

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