Many Americans record their charitable contributions, mortgage interest, property taxes, and other expenses each year, hoping to clear the dollar threshold that will enable them to claim itemized deductions that are greater than the standard deductions.
But don't worry if you don't immediately cross that threshold. That's because there are other deductions that you can declare even if you can't itemize them. These deductions, which are called above-the-line deductions, can be taken even if you don't itemize. Below, you'll find some of the most common deductions that fall into this category along with some specialized ones.
- Don't itemize if the sum of your deductions doesn't exceed the standard deduction.
- You can take above-the-line deductions even if you don't itemize—just be cautious that certain conditions may apply.
- These deductions are used to calculate your adjusted gross income.
- Some of the most common above-the-line deductions include retirement contributions and student loan interest.
- Others include alimony payments and educator expenses.
Tax Deductions: An Overview
A tax deduction is an amount of money you can use to lower your gross taxable income. Deductions come in many different shapes and sizes. The Internal Revenue Service (IRS) caps the amount of money you can claim based on the type of deduction. For instance, if you're claiming medical expenses, you can only deduct the amount that exceeds your adjusted gross income (AGI) by 7.5%.
As noted above, you have two options to claim your deductions: itemizing them or taking the standard deduction. Most people choose to take the standard deduction because they don't have enough expenses to itemize them. If you want to itemize, you must ensure that your deductions exceed the standard deduction based on your tax filing threshold. These limits are noted in the table below for both the 2022 and 2023 tax years.
|Standard Deductions for 2022 and 2023 Tax Years|
|Married Filing Separately||$12,950||$13,850|
|Head of Household||$19,400||$20,800|
|Married Filing Jointly||$25,900||$27,700|
|Qualifying Surviving Spouse||$25,900||$27,700|
Source: Internal Revenue Service
But what if you can't itemize? Don't fret. You can still claim certain deductions even after taking the standard deduction.
Remember: You file 2022 taxes in 2023 and 2023 taxes in 2024.
What Are Above-the-Line Deductions?
Above-the-line deductions are expenses that are used to calculate your AGI. To determine your AGI, these deductions are added together and then subtracted from your gross taxable income. Remember that these deductions are not the same as the deductions that you itemize. Itemized deductions (and the standard deduction) are dollar amounts that are deducted from your AGI.
Use Schedule 1 to report above-the-line deductions and calculate the total. The amount from line 10 of Schedule 1 is then transferred to line 8 of Form 1040 or Form 1040-SR.
Your gross income is the total amount of money you earn during a tax year, including salaries, wages, tips, self-employment income, and investment income among others.
Most Common Above-the-Line Deductions
Retirement Plan Contributions
All contributions made to traditional individual retirement accounts (IRAs) and qualified plans such as 401(k), 403(b), and 457 plans are deductible.
Taxpayers whose incomes exceed a certain level and who contribute to both a traditional IRA and a qualified plan are subject to a graduated phaseout reduction on the deductibility of their IRA contributions. These phaseout thresholds are as follows:
- Single Filers and Heads of Households: $68,000 to $78,000 (2022) and $73,000 to $83,000 (2023)
- Married Filing Jointly: $109,000 to $129,000 (2022) and $116,000 to $136,000 (2023) if the contributing spouse participates in an employer-sponsored plan
- Married Filing Jointly: $204,000 to $214,000 (2022) and $218,000 to $228,000 (2023) if the contributing spouse doesn't participate but is married to someone who does
- Married Filing Separately: $0 to $10,000
Student Loan Interest
All interest paid on federal student loans up to a certain amount is deductible. Anyone who pays more than $600 in student loan interest should receive Form 1098-E: Student Loan Interest Statement. You are allowed to deduct up to $2,500 or the total amount of interest paid—whichever is lower.
You can claim this deduction if you meet all of the following requirements:
- The interest paid was during the tax year on a qualified student loan
- You must pay interest on a qualified student loan
- You aren't married filing separately
- You (or your spouse if you file jointly) aren't claimed as dependents on another individual's returns
You must also ensure that your modified adjusted gross income (MAGI) meets thresholds:
|MAGI Phaseout and Student Loan Deductions (2022)|
|Single, Head of Household or Qualifying Surviving Spouse||Less than $70,000
|Single, Head of Household or Qualifying Surviving Spouse||$70,000 to $85,000||Reduced|
|Married Filing Jointly||Less than $145,000||Full|
|Married Filing Jointly||$145,000 to $175,000||Reduced|
|Married Filing Jointly||$175,000 or more||Eliminated|
Source: Internal Revenue Service
|MAGI Phaseout and Student Loan Deductions (2023)|
|Single, Head of Household or Qualifying Surviving Spouse||Less than $75,000
|Single, Head of Household or Qualifying Surviving Spouse||$75,000 to $90,000||Reduced|
|Married Filing Jointly||Less than $155,000||Full|
|Married Filing Jointly||$155,000 to $185,000||Reduced|
|Married Filing Jointly||$185,000 or more||Eliminated|
Source: Internal Revenue Service
Tuition and Fees
In some cases, it is more advantageous for taxpayers to deduct the costs of tuition and other educational expenses paid to qualified educational institutions than to claim an educational tax credit.
All contributions to Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs) are fully deductible, as long as taxpayers do not have access to any kind of group policy coverage, including that offered by fraternal or professional organizations. The purchase of a qualified high-deductible health insurance policy is also required.
Virtually any expense related to the operation of a sole proprietorship is deductible on Schedule C. This includes rent, utilities, the cost of equipment and supplies, insurance, legal fees, employee salaries, and contract labor. This also includes one-half of the self-employment tax that must be paid on this income.
Other Above-the-Line Deductions
- Alimony: Payments that are not classified as child support and are made to a spouse pursuant to a divorce decree usually count as alimony. These payments are deductible from your gross income unless they are "made under a divorce or separation agreement executed after Dec. 31, 2018," or were modified in certain ways after that date. If your divorce agreement predates that date, check with your accountant to confirm that alimony payments are still deductible.
- Domestic Production Activities: Up to 9% of activities related to the domestic production of certain goods or services, such as engineering or architectural concerns, may be deducted under certain conditions.
- Early Withdrawal Penalties: Any penalties paid for the early withdrawal of money from a CD or savings bond that is reported on Form 1099-INT or 1099-DIV can be deducted.
- Educator Expenses: These include unreimbursed qualified expenses of up to $250 ($500 for joint filers if both fall under this category). Qualified expenses include teaching supplies, books, and other ordinary expenses commonly associated with education. This deduction is available to educators who teach grades K-12 who work at least 900 hours during the year.
What Do Above-the-Line Deductions Do?
Deductions can help lower your tax liability. Some are above the line while others are below the line. Above-the-line deductions are used to calculate your adjusted gross income, which is the line. These deductions are considered a tax break, ultimately lowering your tax liability.
What Are the Most Common Deductions that Are Above-the-Line?
Above-the-line deductions are those that are deducted from your gross income to calculate your adjusted gross income. Some of the most common above-the-line deductions that taxpayers take include retirement contributions, student loan interest, healthcare expenses, and business expenses. You may also qualify for deductions relating to alimony, domestic production activities, early withdrawal penalties, and educator expenses if you qualify.
What's the Difference Between Above-the-Line Deductions and Itemizing Deductions?
Both of these categories help reduce your taxable income. Above-the-line deductions are any deductions that you claim to reduce your gross taxable income. The sum of these deductions is deducted from your gross income to determine your adjusted gross income. You can take these deductions even if you choose not to itemize.
Itemized deductions, on the other hand, are considered below the line. As such, they are calculated beneath your AGI. Itemizing your deductions only makes sense if the sum exceeds the standard deduction.
The Bottom Line
Any or all of these deductions can be taken in addition to the itemized deductions for eligible taxpayers. Of course, there are rules and limitations that must be observed. For more information on above-the-line deductions, read the instructions for Form 1040 on the IRS website or consult your tax advisor.
Internal Revenue Service. "SCHEDULE 1: Additional Income and Adjustments to Income."
Internal Revenue Service. "Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)."
Internal Revenue Service. "Types of Retirement Plans."
Internal Revenue Service. "2023 Limitations Adjusted as Provided in Section 415(d), etc.," Page 4
Internal Revenue Service. "Publication 970: Tax Benefits for Education," Page 39.
Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans," Pages 2-3.
Internal Revenue Service. "SCHEDULE C: Profit or Loss from Business," Page 1.
Internal Revenue Service. "2022 Instructions for Schedule C: Profit or Loss from Business," Page 9.
Internal Revenue Service. "Topic No. 452 Alimony and Separate Maintenance."
Internal Revenue Service. "Publication 550: Investment Income and Expenses," Page 18.
Internal Revenue Service. "Topic No. 458: Educator Expenses."