Above-the-line vs. itemized deductions
Both can lower taxable income, but they affect different parts of your return.
| Above-the-line deductions | Itemized deductions | |
|---|---|---|
| Effect on your return | Subtracted from gross income (what you earned before deductions) which reduces your AGI. | Subtracted from AGI, which reduces your taxable income, but not your AGI. |
| Where it’s claimed | Schedule 1 | Schedule A |
| Available with the standard deduction? | Yes | No |
Why lowering your AGI matters
AGI is used to determine eligibility for many tax benefits and income-based limits. Reducing it may help you qualify for a larger deduction or credit, depending on that tax benefit’s rules. Most of these actually use a modified version of AGI, called MAGI—your AGI with certain items added back—though for many filers the two are very close or identical. Reducing your AGI (and MAGI) can help you qualify for a deduction or credit you’d otherwise lose.
For example, suppose you’re a single filer with $85,000 in gross income who is paying college tuition. The American Opportunity Credit, worth up to $2,500, starts phasing out once your MAGI exceeds $80,000. If you make a deductible $7,000 traditional IRA contribution:
$85,000 (gross income)− $7,000 (adjustments) = $78,000 AGI
Your AGI (and your MAGI) reduces to $78,000, back under the $80,000 limit, so you can claim the full credit. That’s the payoff: the adjustment didn’t just lower your MAGI, it restored another tax break worth up to $2,500. Keep in mind that not every traditional IRA contribution is deductible. The deduction may be limited if you or your spouse has a workplace retirement plan and your income exceeds the statutory threshold.
Common above-the-line deductions
The table shows general maximums. Eligibility rules, income phaseouts, and other limits may reduce the amount you can claim.
| Deduction | 2025 tax year | 2026 tax year |
|---|---|---|
| Traditional IRA contributions | Up to $7,000; $8,000 if age 50 or older | Up to $7,500; $8,600 if age 50 or older |
| Student loan interest | Up to $2,500 | Up to $2,500 |
| HSA contributions | $4,300 self-only; $8,550 family | $4,400 self-only; $8,750 family |
| Educator expenses | Up to $300 | Up to $350* |
| Self-employed health insurance | Eligible premiums, subject to limits | Eligible premiums, subject to limits |
| One-half of self-employment tax | 50% of self-employment tax | 50% of self-employment tax |
Source: Internal Revenue Service (1, 2, 3, 4, 5)
*New for 2026 — a second way to deduct educator expenses: Eligible educators who itemize can also claim an itemized deduction for classroom expenses beyond the $350 above-the-line deduction cap.
Working Family Tax Cuts 2025: You may have heard about recent deductions for tips, overtime, car loan interest, and an extra deduction for seniors. You can claim these even if you don’t itemize. However, they’re reported on the new Schedule 1-A, not Schedule 1, and they aren’t above-the-line deductions. Unlike the deductions in this article, they reduce your taxable income without reducing your AGI.
How to claim above-the-line deductions
Adjustments to income are reported on Schedule 1 and carried to Form 1040. The supporting form depends on the deduction. For example, an HSA deduction requires Form 8889, while student loan interest is claimed directly on Schedule 1 using the amount reported on the Form 1098-E your lender sends you.
