An adjustment to income is an expense that can reduce your taxable income before you calculate your tax. These deductions are often called "above-the-line deductions" because you can claim them whether you take the standard deduction or itemize your deductions.
By lowering your adjusted gross income (AGI), adjustments to income may also help you qualify for other tax benefits and credits.
Common Adjustments to Income
The following expenses may qualify as adjustments to income on your federal tax return:
- Medical Savings Account (MSA) Deduction - If you contributed to an Archer Medical Savings Account, you may be able to deduct your eligible contributions. This deduction is reported on Form 8853.
- Educator Expenses - Eligible teachers and educators may deduct certain unreimbursed classroom expenses, subject to IRS limits and eligibility requirements.
- Reservists, Performing Artists, and Qualified Government Employee Expenses - Certain work-related expenses may be deductible for qualified military reservists, eligible performing artists, and fee-based state or local government officials.
- Health Savings Account (HSA) Deduction - If you contributed to a Health Savings Account (HSA), you may qualify for a deduction for eligible contributions. This deduction is reported on Form 8889.
- Moving Expenses - For tax years after 2017, moving expenses are generally deductible only for active-duty members of the U.S. Armed Forces who move because of a military order and permanent change of station.
- Contributions to SEP, SIMPLE, and Qualified Retirement Plans - Self-employed individuals may be able to deduct contributions made to eligible retirement plans, including SEP-IRAs, SIMPLE plans, and certain qualified plans.
- Self-Employed Health Insurance Deduction - If you're self-employed and pay for your own health insurance, you may be able to deduct eligible premiums for yourself, your spouse, and your dependents.
- Penalty on Early Withdrawal of Savings - If a bank or financial institution charged you a penalty for withdrawing funds early from a certificate of deposit (CD) or savings account, that penalty may be deductible.
- Alimony Paid - Alimony payments may be deductible only if the divorce or separation agreement was executed before January 1, 2019, and meets IRS requirements. Agreements finalized after that date generally do not qualify for a deduction.
- IRA Deduction - Contributions to a traditional IRA may be deductible, depending on your income, filing status, and retirement plan coverage.
- Nondeductible IRA Contributions - Even when IRA contributions are not deductible, they should still be reported on your return to establish basis in the account and help prevent future double taxation.
- Student Loan Interest Deduction - You may be able to deduct eligible student loan interest paid during the year. Your lender may report this information on Form 1098-E.
- Domestic Production Activities Deduction - The Domestic Production Activities Deduction (Form 8903) has expired and is no longer available for current tax years.
- Other Adjustments - The IRS allows several less common adjustments to income that may apply to specific situations. Our tax software will help determine whether you qualify for any additional adjustments.