Question

There are two classes of deductions. Deductions for AGI and Deductions from AGI. Discuss the differences between these two classifications and the types of deductions in each classification. Explain which deductions are more advantageous for your tax return.

Answer 1

Answer :-

     Deductions for AGI are also called above the line deductions and can be claimed even if the taxpayer does not itemize. They reduce AGI and could increase multitude of other tax   benefits that are phased out or disallowed altogether based on AGI or modified AGI and could as well reduce the amount of taxable social security or Railroad retirement benefits.

                Deductions for AGI reduce net taxable income.

On other hand deductions from AGI also called below line deductions are standard deductions or itemized deductions from schedule A and personal exemptions .The tax benefit of a deduction claimed from AGI is always limited to the amount of actual deduction .

Deduction for AGI is more advantageous for your tax deduction  as they reduce AGI and increase multitude of tax benefits phased out or disallowed based on AGI and could reduce amount of taxable social security benefits .

Step-by-step explanation

Deductions for AGI entail:

• Alimony
• Early withdrawal penalties for CDs and savings accounts
• Educator expenses
• Job-related moving expenses
• Qualified tuition and fees
• Self-employed deductions for health insurance premiums, half of the Self-Employment Tax and traditional retirement plan contributions
• Student loan Interest
• Traditional IRA contributions

Deductions from AGI entail:

• Medical expenses
• Certain state and local taxes
• Contributions to qualified charities
• Personal casualty losses
• Certain personal interest expenses
• Miscellaneous itemized deductions