CHAPTER 12Deductions Allowed in Figuring Adjusted Gross Income
Adjusted gross income (AGI) is the amount used in figuring the 7.5% adjusted gross income floor for medical expense deductions (17.1), the 10% floor for personal casualty and theft losses from a federally declared disaster (18.8), and the charitable contribution percentage limitations (14.17).
AGI generally also determines the thresholds for the phaseouts of the child tax credit and the credit for other dependents (Chapter 25).
If you follow the instructions and order of the tax return, you will arrive at adjusted gross income automatically. But if you are planning the tax consequences of a transaction in advance of preparing your return, see the explanation of how to figure adjusted gross income (AGI) (12.1).
There is an advantage in being able to claim deductions directly from gross income (“above-the-line”) in arriving at adjusted gross income, since such deductions are allowed even if you claim the standard deduction rather than itemizing deductions on Schedule A (Form 1040 or 1040-SR). Another advantage of such deductions is that they also reduce state income tax for taxpayers residing in states that compute tax based on federal adjusted gross income. This chapter will explain the deductions that qualify for the direct deduction from gross income.
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