Question

3. Deductions for AGI are often referred to as “above-the-line” or “Schedule 1” deductions. Explain.

Answer 1

The Total Income which you have earned is not taxed directly. The Income Tax is Calculated by applying the tax brackets to your taxable Income. You derive the Taxable income after edducting above line deductions which is the Adjusted Gross Income. From Adjusted Gross Income Below line Deductions are deducted to get the Taxable Income. Thus there are two types of Deductions, one is the Above-the-line deductions and the other one is Below-the-line Deductions or itemized Deductions.

So, let us duscouss about Above-the-line deductions

Above-the-line deductions are the first you deduct from your gross income. The tax payers have to meet some requirements to deduct these deductions. These are also called as Adjustments to Income, and so the resultant is called as the Adjusted Gross Income. These includes the specific and personal expenses incurred during the period.

You have to claime these deductions after filling the Schedule 1 form and attaching it to the income tax return and so it is called Schedule 1 deductions.

some of the Above line deductions are as follows

1) Business Expenses for Governent officials

2)Educator expenses for classroom supplies upto $250

3) Moving expenses for Active duty members of armed forces

4)Health Savings account Contributions made with post tax money

5) Retirement Account contributions for self-employed individuals and business owners.

6)Health Insurance Premium for self employed workers

7)Contribution to Traditional IRA

8) Tution fees for you, for your spouse or a dependent

9)Alimony Paymentsfor agreement that took before 2019