Chapter 12

Deductions Allowed in Figuring Adjusted Gross Income

Adjusted gross income (AGI) is the amount used in figuring the 7.5% floor for medical expense deductions (17.1), the 10% floor for personal casualty and theft losses (18.11), the 2% floor for miscellaneous itemized deductions (19.1), and the charitable contribution percentage limitations (14.17).

If you follow the instructions and order of the tax return, you will arrive at adjusted gross income automatically. But if you are planning the tax consequences of a transaction in advance of preparing your return, see the explanation of how to figure adjusted gross income (AGI) (12.1).

There is an advantage in being able to claim deductions directly from gross income in arriving at adjusted gross income, since such deductions are allowed even if you claim the standard deduction and do not itemize deductions on Schedule A of Form 1040. Another advantage of such deductions is that they also reduce state income tax for taxpayers residing in states that compute tax based on federal adjusted gross income. This chapter will explain the deductions that qualify for the direct deduction from gross income.

12.1 Figuring Adjusted Gross Income (AGI)

12.2 Claiming Deductions From Gross Income

12.3 What Moving Costs Are Deductible?

12.4 The Distance Test

12.5 The 39-Week Test for Employees

12.6 The 78-Week Test for the Self-Employed and Partners

12.7 Claiming Deductible Moving Expenses

12.8 Reimbursements of Moving Expenses