What are Above the line Tax Deductions?

According to Internal Revenue Code Section 62, an above-the-line tax deduction is a term used to describe the deductions which are allowed by the Internal Revenue Service for a taxpayer to subtract from the gross income.

The reason they are referred to as "above-the-line" is because these tax deductions are subtracted from a taxpayer's gross income in order to calculate the adjusted gross income. Any further deductions applied to the newly calculated adjusted gross income are commonly referred to as "below-the-line" deductions.

Above-the-Line vs. Below-the-Line:

Above-the-line deductions are considered to be more advantageous than below-the-line deductions because they do not have income-sensitive phase outs and other types of limitations, excluding certain taxpayers from eligibility.

In typical cases, when below-the-line tax deductions are calculated and subtracted from an adjusted gross income, many wealthier taxpayers are phased out under the guidelines of Revenue Code Section 68. Above-the-line tax deductions are also relevant to all tax payers with a tax deduction checklist, even if the tax payer chooses to take a standard tax deduction approach as apposed to a .

Additionally, certain below-the-line deductions may be dropped from a taxpayer's tax deduction list if the deduction exceeds a certain percentage of the taxpayer's adjusted gross income.

In this case, if a below-the-line tax deduction for medical expenses is considered for tax deduction, it is only deductible to the extent in which it exceeds 7.5 percent of the taxpayer's total income. Above-the-line tax deductions will lower the total amount of a taxpayer's adjusted gross income, giving them a greater eligibility for further below-the-line deductions, which may be subject to certain percentage of adjusted gross income limitations.

Examples of Above-the-Line Deductions:

Above-the-line business deductions are generally allowed for most necessary business expenses having to do with normal business trade or functions, which are considered to be normal and reasonable, without crossing the line of extravagant. The deductions contained in the tax deduction checklist cannot be services performed by the taxpayer as an employee.


The tax deduction list includes any reasonable allowance for an employee's salary, with compensation for personal services; any expenses that are required during an employee's travels for the purpose of business operations, including reasonable meals and necessary lodging; and rental payments which are required for the continued use and possession of an article. The above-the-line tax deduction checklist extends to:

Employee expenses which have been reimbursed by the employer;

The expenses incurred by a performing artists, members of the Army Reserve, and state officials;

The expenses incurred by teachers, including for books and other school supplies;

Payments of alimony;

Vehicles that meat a certain standard of emission quality;

Net losses incurred from the sale of property;

Expenses as a result of creating rental or royalty income;

Expenses incurred as a result of moving to another residence;

Expenses incurred from receiving a higher education;

Repayments required for supplemental unemployment compensation;

Fees incurred due to a premature withdrawal of funds.

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