ABOVE THE LINE TAX DEDUCTIONS
June 30, 2020 - Douglas Myser
Above the line tax deductions. While you need to itemize deductions to take advantage of the tax benefits discussed in the previous section, there are quite a few tax deductions that you can use regardless of whether you itemize or take the standard deduction. These are known as adjustments to income and are more commonly referred to as above the line tax deductions. And with a few exceptions, most of these survived the recent tax reform unscathed. Here are the above the line deductions you may be able to take advantage of in 2019. Tax deferred retirement contributions. If you contribute to any tax deferred retirement accounts, you can generally deduct the contributions from your taxable income, even if you don't itemize. Above the line tax deductions.
These include: Contributions to a qualified retirement plan such as a traditional 401(k) or 403(b). For 2019, the maximum elective deferral by an employee is $19,000. If you're 50 or older, these limits are raised by $6,000 each year. Contributions to a traditional IRS. The IRS contribution limit is $6000 for 2019, with an additional $1000 catch up provision allowed if you're 50 or older. However, it's important to point out that if you or your spouse is covered by a retirement plan at work, your ability to take the traditional IRS deduction is income restricted.
If you are self-employed, your contributions to a SEP-IRA, SIMPLE IRA, or a Solo 401(k) are generally deductible, unless they are made on an after tax (Roth) basis. Health Savings account and flexible spending account contributions. If you contribute to a tax advantaged healthcare savings account (HSA), your contributions are tax-deductible up to the IRS's contribution limits. In 2019, the limits are $3500 for those with single healthcare policies and $7000 for those with family coverage. There's also a $1000 catch up allowance if you are 55 or older. Dependent care FSA contributions are also deductible.
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