Above The Line Deduction

What is ‘above the line deduction’

Above the hold is an item which is subtracted from gross income to calculate adjusted gross income on IRS form 1040. The IRS form 1040 is used by individual U.S. taxpayers and households to calculate and submit their annual taxes. Above the line deductions occur on lines 23 through 35 of the IRS form 1040 and include items such as educator expenses, health Savings account deduction, expenses, deductible self-employment taxes, deduction of contributions to retirement accounts, student loan interest, tuition and more. Above the line deductions individual elements of itemized deductions are on form 1040 schedules, and different from the standard deductions that can be claimed on line 40 of IRS form 1040.

Breaking over holding the line’

Above the line deductions are subtracted from gross income to reach adjusted gross income. Gross income is calculated by summing the individual or household sources of income during the year as described on W-2S and form 1099s, dividends, capital gains, income, unemployment, Retirement account distributions, social security income or other forms of monetary income or compensation. Next, above the line deductions are summed and subtracted from gross income to reach adjusted gross income. From adjusted gross income itemized deductions or standard deduction taken in order to reach taxable income. This ending taxable income is the number that determines the amount of tax individuals or households pay, and the gross income or adjusted gross income.

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