Above The Line
Last week I talked about some common mistakes, and I mentioned that the Standard Deduction was
essentially doubled with the passage of the tax bill of 2017. For single taxpayers the Standard Deduction
is $12,200 and $24,400 for married taxpayers in 2019. It goes even higher if you (or your spouse) is age
65 or older or blind. This means that most taxpayers don’t itemize any longer. No more worrying about
property taxes, vehicle taxes or even charitable contribution receipts.
Not itemizing doesn’t mean you’ve lost all deductions; it just means you will take advantage of deductions
that are “Above The Line”. In tax jargon, the “Line” is Adjusted Gross Income (AGI), and deductions that
are taken into account before AGI are considered “Above The Line”. Simplification has made filing taxes
easier because you don’t have to worry about deductions like before but don’t overlook those that will
reduce your AGI.
Individual Retirement Accounts (IRAs) are retirement accounts for folks that don’t have another
retirement plan option. Contribution limits are relatively low, $6,000 ($7,000 if age 50 or above), and
there are other restrictions but if you contribute to an IRA you take the deduction above the line.
Health Savings Accounts are available with some high deductible health insurance plans. These plans allow
you to contribute money into a savings account specifically designed to pay health costs and get a tax
deduction for the contribution. There are several limits and requirements but if you qualify, you can
contribute up to $3,500 individually, $7,000 for family coverage and an additional $1,000 if age 55 or
older. This deduction is also taken above the line.
If you’re self‐employed, there are several above the line deductions. In addition to normal operating
expenses that are deducted above the line, you may also qualify to deduct the cost of health insurance
for the owner and family, one half of self‐employment taxes, and retirement plan contributions above the
line. As always, limitations can apply but don’t miss all the expenses you’re entitled to if you’re self‐
employed.
There are a few other common “Above The Line” deductions, including a $250 deduction for
unreimbursed classroom expenses incurred by teachers, so be sure you talk to your tax advisor about
these deductions to make sure you pay the least tax possible.
If you don’t have a tax advisor, you can call or email our office. We want to make sure every taxpayer pays
the least tax legally possible. As always, I am looking for article ideas that you would like me to cover. If
you have an idea for a future article, or just have a topic you would like more information on, please send
me an email.
