Question

what is a for AGI deduction? Give three examples.

Answer 1

They are also known as above the line deductions. They reduce taxable income. They are directly or indirectly related to business activities, and sometimes subsidize specific activities. Unreimbursed employee business expenses though related to the business are allowed only as itemized deduction. Investment expenses, which are, itemized deduction, if related to rental or royalty income is a deduction for AGI.

Examples:

Moving expenses:

Taxpayers beginning their first job, changing location with the same employer, or taking a job after a prolonged gap, can deduct moving expenses. Moving personal possessions is an indirect business cost, which would not have incurred if there were no business purpose.

To deduct, distance between old residence to new business place should be more than 50 miles than old residence to old business place. Even after the move, taxpayer must be in full time employment for 39 of the first 52 weeks after the move. Or self-employed for at least 78 of the first 104 weeks after the move.

Self-employed health insurance deduction:

Self-employed individuals can deduct health insurance premiums paid for themselves, their spouse, dependents, and children under age 27. Amount of deduction is limited to the income from self-employment.

This deduction is not applicable if the taxpayer is eligible to participate in a taxpayer’s or their spouse’s employer sponsored health plan, regardless of taxpayer’s election to participate.

Student loan interest deduction:

Interest on loan taken to pay qualified educational expenses of spouse, self, or dependent is allowed as a deduction to AGI. Maximum deduction is capped at $2,500. It is subject to phase out when modified AGI of the taxpayer is in certain limits. Married filing separate taxpayers are not eligible for the deduction.

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