Don't Mess With Taxes

Most taxpayers have always used the standard deduction amount. That group of filers grew even more after the enactment of the Tax Cuts and Jobs Act (TCJA) of 2017, which dramatically increased the standard amounts.

But even if you find the easier standard deduction option the way to file, stop. You might be missing some tax breaks that are available to every taxpayers, both those who claim the standard deduction and those who itemize.

All taxpayers can also claim any of the two dozen above-the-line tax deductions for which they qualify.

Tax law and form changes: When the TCJA became law, the Internal Revenue Service also revised tax return forms. Most notably, it dramatically reduced Form 1040 (and eliminated the 1040EZ and 1040A versions).

No, the individual tax return didn't shrink to the still-mythical postcard-sized form. And the relatively smaller form size didn't last long. The 2023 Form 1040 is, in fact, almost two full front-and-back pages again.

But one TCJA form change has held.

Much of the information that previously was directly on Form 1040 was moved to a series of schedules. That included the tax write-offs, dubbed above-the-line deductions when they were listed on page 1 of the old Form 1040 (and 1040A), that appeared on the 1040 just above the line where you enter your adjusted gross income (AGI).

Now you'll find them on the 1040 form's Schedule 1.

Sure, tax software and tax preparers help ensure that their clients don't miss these tax breaks. But since they're no longer easily visible on the front of Form 1040, they could be out of mind at filing time.

So that you don't miss them, and are prepared when your tax adviser or software asks, here's a quick overview of these above-the-line deductions that don't require itemizing. And yes, they're still called above-the-line deductions since the Schedule 1 info gets entered on Form 1040's line 10, just above line  11 where your AGI is calculated. 

Official adjustments name on schedule: Their above-the-line moniker notwithstanding, these deductions officially are known as adjustments to income. They're enumerated in Part II of Schedule 1, which is on the reverse, page 2 side of the schedule.

Below is a screen shot of the first 23 lines of the Adjustments to Income section.

See more tax forms and more about them at Tax Forms 2024.

And here's a bit on what they entail.

Educator expenses (line 11): Eligible educators (more on this in a minute) can deduct some qualified unreimbursed classroom expenses paid out-of-pocket. The amount is adjusted annually for inflation, and on 2023 returns is worth $300 per eligible educator. (For 2024 planning, it stays at that level.) If you and your spouse are filing jointly and both of you were eligible, the maximum deduction is $600. However, neither spouse can deduct more than $300 of his or her qualified expenses here.

Most educators find they spend more than the $300 (or $600 joint filer) limit. But every expenditure helps. So if you're an eligible educator — the IRS says this includes kindergarten through grade 12 teachers, instructors, counselors, principals or aides who worked in a school for at least 900 hours during a school year — don't miss out on this deduction. One other note: home school parents don't qualify for this deduction.

Certain business expenses (line 12): Don't get too excited thinking this might help reduce your business tax bill. Schedule 1 notes that these write-offs are limited to folks in special job categories, specifically military reservists, performing artists and fee-basis government officials. Also, reserve military personnel can only use this for costs incurred when they travel more than 100 miles from home to perform services as a National Guard or other armed forces reserve member. If you drove to these duties in 2023, those miles can be counted at 65.5 cents per mile (it was bumped up to 67 cents/mile for 2024). You also can add in parking, fees, and tolls. All taxpayers who take this deduction also will need to fill out Form 2106.

Health savings account deduction (line 13): Here you can write off your contributions to one of these medical coverage plans, commonly referred to as HSAs. However, you'll need more paperwork here, too. You must also file Form 8889.

Moving expenses for members of the Armed Forces (line 14): Folks who've claimed this tax break in the past probably noticed the added reference on this line's description. It previously was shown only as moving expenses. But the TCJA changed that. Now relocation costs are limited to military personnel who are on active duty and who move pursuant to a military order related to a permanent change of station. These relocating U.S. Armed forces members also will have to fill out Form 3903 to detail their eligible costs, the total of which go here.

Self-employment tax (line 15): If you worked for yourself, either full-time or as gigs to bring in some extra spending money, you likely had to pay self-employment tax. Half of that amount can be subtracted here. You'll have to include your Schedule SE, too.

Self-employed SEP, SIMPLE, and qualified plans (line 16): Staying in the be-your-own-boss vein, if you were able to contribute to a qualified self-employment retirement plan, note that amount here.

Self-employed health insurance deduction (line 17): One more break for the independent worker. If you paid for your own medical policy, those premiums are fully deductible here. The insurance also can cover your child who was younger than 27 at the end of 2023, even if your son or daughter wasn't your dependent. If you don't use a tax pro or tax software, there's a worksheet for the self-employed insurance deduction in the Form 1040 Schedule 1 instructions (page 91).

Penalty on early withdrawal of savings (line 18): If you had to cash in a CD or other savings plan and paid a price for getting your money from your bank, you can write off that fee here. You should have received a Form 1099-INT or Form 1099-OID detailing the early-withdrawal penalty amount.

Alimony paid (line 19): The TCJA also changed the tax treatment of alimony for ex-spouses who pay and receive this money. But its changes don't affect divorces that were granted before the tax law took effect. Those distinctions affect the entries on this three-part line.

Under the TCJA, the deduction for alimony payments — the amount entered on line 19a — will remain in effect for folks with divorce agreements finalized by a court and/or a formal divorce decree issued before the end of 2018. That's why the date you enter on line 19c is so important.

As for the former spouse getting alimony, if your marital status change was on or after the TCJA's Jan. 1, 2019, effective date, then you don't owe tax on the spousal payments you get. If, however, it was before the law changed, you still owe Uncle Sam. That's why line 19b wants your Social Security number, so the IRS can double check that you report it as income.

IRA deduction (line 20): If you have a traditional IRA, you might be able to deduct some or all of your contribution. This Schedule 1 deduction depends on many variables, such as income and workplace retirement plans, both for you and, if you're married and file jointly, your spouse. Again, there's a worksheet on pages 93 and 94 of the Form 1040 instructions.

Student loan interest deduction (line 21): You can write off up to $2,500 in interest on your school debt here. Yes, there's yet another worksheet (page 95) to make sure you qualify — there are AGI determined earning limits — and figure how much you can enter on this line.

Reserved for future use (line 22): In prior tax year versions, this line was the tuition and fees adjustment. However, lawmakers decided to eliminate this deduction (as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020) and make up for it by making the Lifetime Learning Credit available to more individuals. The exchange actually is a better deal, as a tax credit if more valuable than a deduction because a credit directly reduces tax liability dollar-for-dollar. So be sure to check out that educational tax break (and others) if you paid schooling costs for yourself, your spouse, or dependents. As for Form 1040, if another adjustment to income is approved by Congress for future filings, it will be slotted here.

Archer MSA deduction (line 23): An Archer MSA, short for medical savings account, was available only to certain self-employed people and small businesses. I say was because the Archer MSA program expired on Dec. 31, 2007. No new accounts were allowed after that date, but Archer MSAs established before then can continue to be used and receive contributions. The contributions can be claimed here, along with the filing of Form 8853.

But wait, there's more! Line 24 offers a dozen more changes to reduce your income as, what else, other adjustments to income.

As shown in the pictured bottom half of Part II, are these various write-offs, with a bit of explanation following the image (in case you're reading this on a small mobile device).

Above-the-line Schedule 1 image 2

See more tax forms and more about them at Tax Forms 2024.

The 12 additional income adjustments as alphabetic sublines of line 24 are:

1. Jury duty pay if you gave the pay to your employer because your employer paid your salary while you served on the jury.
2. Deductible expenses related to income reported on line 8l (that's in Part 1 of Schedule 1's Additional Income section) from the rental of personal property engaged in for profit.
3. Nontaxable amount of the value of Olympic and Paralympic medals and USOC prize money reported on line 8m (again, in Part 1's Additional Income section).
4. Reforestation amortization and expenses (see IRS Publication 535).
5. Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see IRS Publication 525).
6. Contributions to section 501(c)(18)(D) pension plans (see IRS Publication 525).
7. Contributions by certain chaplains to section 403(b) plans (see IRS Publication 517).
8. Attorney fees and court costs for actions involving certain unlawful discrimination claims, but only to the extent of gross income from such actions (see IRS Publication 525).
9. Attorney fees and court costs paid in connection with an award from the IRS for information you provided that helped the IRS detect tax law violations, up to the amount of the award includible in your gross income.
10. Housing deduction from Form 2555.
11. Excess deductions of section 67(e) expenses from Schedule K-1 (Form 1041), box 11, code A. See the Instructions for Schedule K-1 (Form 1041).

Finally, skipping from 24k to the end of the alphabet (leaving room for possible future items on the schedule), we get the 12th possible write-off.

Line 24z is the always popular catchall entry. Here you report any adjustments not entered elsewhere.

1099-K entry possibilities: Line 24z actually could come into play for many folks who use online apps to send or receive money. If the financial transactions are for personal money exchanges, such as paying your part of a meal tab that a friend paid for in full, the IRS doesn't care.

But if you are paid for products and/or services through online apps and marketplaces, such as PayPal, Venmo, CashApp, eBay, Etsy, Uber, Lyft, and Airbnb, that's taxable income. And those official third-party settlement organizations (TPSOs) will send you details of those payments on Form 1099-K.

If that 1099-K includes amounts that should be there or the form is otherwise incorrect and you can't get it corrected, you can enter the amount on line 24z. You also can account, in certain situations, for the sale of a personal item at a loss that you didn't report on Form 8949, Sales and Other Dispositions of Capital Assets.

Confused about 1099-K matters? You are not alone. That's why the IRS created and keeps updating its special 1099-K frequently asked questions page. The instructions for the single above-the-line deduction on line 24z of Schedule 1 probably could account for a whole new FAQ section on its own!

The rest of the above-the-line deductions, thank goodness, aren't as complicated. So be sure to check them out, whether you use the standard deduction or itemize, and claim all for which you qualify.

The bit more work Schedule 1 requires could definitely be worth it in a reduced tax bill, which is the ultimate goal of all taxpayers every filing season.

You also might find these items of interest:

• 9 ways to make tax filing easier
• Maximizing your itemized tax deductions
• Tax rates and income brackets for 2023 & 2024

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