Above- and Below-the-Line Deductions for Taxpayers

Cubby Bice is a Mooresville, North Carolina, executive who delivers financial planning solutions related to various classes of assets. Knowledgeable about strategies for filing taxes with the IRS, Cubby Bice works to ensure that clients receive the maximum deductions possible.

One key distinction in tax filings is between above-the-line and below-the-line deductions. Also called itemized or standard deductions, below-the-line deductions are based on adjusted gross income (AGI). The standard deduction is $12,950 for individuals in 2022 ($25,900 for jointly filing married couples), although the amount automatically deducted is even higher for those over 65.

An estimated 90 percent of filers do not exceed this threshold. For those who do (and who wish to itemize deductions), charitable contributions are one option. One strategy involves stacking such contributions, usually allocated over a period of years, in a single year to maximize deductions. Another common strategy is to itemize mortgage interest expenses, with as much as $750,000 in financed principal tax being deductible. In addition, medical outlays that exceed 7.5 percent of the AGI may be itemized as deductible expenses.

Above-the-line deductions are available whether the standard deduction is taken or expenses are itemized. They include contributions to tax advantaged vehicles such as health savings accounts, traditional IRAs, and qualified retirement plans. Another tax deductible strategy involves qualified charitable distributions (QCD), which are limited to those over age 70.5 who transfer money to selected charities through their IRAs.

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