Simple English definitions for legal terms
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Above-the-line refers to a type of deduction that is taken from gross income before calculating adjusted gross income. This means that certain expenses, such as IRA contributions and moving expenses, can be deducted before determining how much tax is owed. In the past, these deductions were written above a dark line on tax returns. The opposite of above-the-line deductions are below-the-line deductions, which are taken after calculating adjusted gross income.
Above-the-line is an adjective used to describe a type of deduction taken after calculating gross income but before calculating adjusted gross income. This means that these deductions are subtracted from your income before other deductions are made.
Examples of above-the-line deductions include:
These deductions are called above-the-line because they used to be written above a dark line on individual tax returns. By subtracting these deductions from your gross income, you can lower your taxable income and potentially reduce the amount of taxes you owe.