Deductions Credits

Deductions & Credits ## Above-the-Line vs. Below-the-Line Deductions Above-the-line deductions (adjustments to income) are subtracted from gross income to arrive at AGI. They benefit all taxpayers regardless of whether they itemize. Below-the-line deductions are taken after AGI — either the standard deduction or Schedule A itemized deductions. Taxpayers choose whichever is greater. | Above-the-Line (Schedule 1, Part II) | Below-the-Line (Schedule A) | |---|---| | IRA contributions (deductible) | State and local taxes (SALT) | | Student loan interest | Mortgage interest | | Educator expenses | Charitable contributions | | HSA contributions | Medical expenses (>7.5% AGI) | | Self-employment tax (50%) | Casualty losses (federally declared disasters) | | Self-employed health insurance | Miscellaneous itemized (limited post-TCJA) | --- ## Schedule A — Itemized Deductions ### State and Local Taxes (SALT) - Deductible: state income taxes (or sales taxes, but not both), real property taxes, personal property taxes - Cap: $10,000 per return ($5,000 for MFS) — enacted by TCJA - Foreign taxes paid may alternatively be taken as a credit (Form 1116) ### Mortgage Interest - Deductible on acquisition debt for a primary and one secondary residence - Limit: $750,000 of acquisition debt (loans taken after December 15, 2017); $1,000,000 for prior loans - Home equity loan interest is deductible only if proceeds used to buy, build, or substantially improve the home ### Charitable Contributions - Cash donations: deductible up to 60% of AGI for public charities - Appreciated property (long-term capital gain property): deductible at FMV, limited to 30% of AGI - Carryforward of excess contributions: 5 years - Must have written acknowledgment for donations of $250 or more ### Medical Expenses - Deductible to…