Above-the-Line Tax Deductions Anyone Can Take

You don’t need to itemize your return to get these breaks from the IRS

John Waggoner,

AARP

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En español

Published March 29, 2023

/ Updated February 16, 2024

The Voorhes/Gallery Stock

If you’re thinking about spending the next few weeks trying to scrounge up tax deductions, you can probably relax. Fewer than 10 percent of all tax filers chose to itemize their deductions in 2020, and the numbers will probably be the same in the 2023 tax year.

The big drop in itemized returns can be attributed to the Tax Cuts and Jobs Act of 2017, which raised the standard deduction dramatically starting in tax year 2018. In the 2023 tax year, individuals can claim a $13,850 standard deduction, and married couples can claim $27,700. Those who file as head of household can claim $20,800. For each taxpayer 65 or older or blind, the standard deduction goes up $1,500 ($1,850 for single filers and heads of households).

For most retirees and preretirees, the fat standard deduction means skipping the hunt for juicy itemized deductions and moving on to figuring out how much tax you owe. But there are a handful of deductions that you may be able to claim even if you don’t itemize. They’re called above-the-line deductions, and they can be your friends at tax time.

Drawing the line

What’s “the line”? That would be line 11 on IRS Form 1040 and 1040-SR, which is where you put your adjusted gross income (AGI). The first line below that, line 12, is where you would put your itemized deductions from Schedule A.

If you are eligible for above-the-line deductions, you can deduct them before you calculate your adjusted gross income, no matter how small those deductions are. Many people have at least one above-the-line deduction that fits them. Many of these above-the-line deductions are calculated using the Schedule 1 worksheet — Additional Income and Adjustments to Income — included in the 1040 instructions and reported on line 10 of your tax return, one line above your adjusted gross income.

Common above-the-line deductions

1. Alimony paid

If you divorced before 2019 and are paying alimony, your payments are an above-the-line deduction. (For the recipient, that alimony is taxable income.) If you were divorced on or after Jan. 1, 2019, you can’t deduct your alimony payments, and the recipient doesn’t have to pay taxes on them.

You can alter your divorce agreement to say the new rules apply to your payments.

2. Early withdrawal penalties

Did you have to crack open a bank certificate of deposit last year? Did you get dinged with a penalty? You can deduct the danged ding above the line.

3. Health savings accounts (HSAs)

If you have a high-deductible medical plan, you can cover some of your out-of-pocket expenses with an HSA. If you pay for your HSA with after-tax money, you can deduct up to $7,750 for families and $3,850 for individuals this tax year. If you’re 55 or over at any time in the year, you can contribute and deduct an additional $1,000. You’ll need to file Form 8889 — Health Savings Accounts (HSAs) — with your return. If you paid for your HSA with pretax money, you don’t get the deduction.

Estimate Your 2023 Taxes

AARP’s tax calculator can help you predict what you’re likely to pay for the 2023 tax year.

4. Individual retirement accounts (IRAs)

If you contributed to a traditional IRA, and neither you nor your spouse had a retirement plan available to you during the year, the contributions are tax-deductible. You can each contribute $6,500 — $7,500 if you’re 50 or older. You can make your contribution for 2023 until April 15, 2024. If you did have a retirement plan available at work, you still may be able to deduct some or all of your IRA contribution, depending on your income.

5. Military moving expenses

If you have a permanent change of station — either from your home to your military base, from one base to another, or a move from your last post back home — you can deduct reasonable moving expenses. Those include the cost of moving household goods and personal effects, storage and traveling (including lodging) to your new home. That burger you bought at a rest area on the Ohio Turnpike? Nope. Meals aren’t included.

You must take the deduction within one year of ending your active duty.

6. Self-employment costs

One of the shocks for many people who become self-employed is the payroll tax for Social Security and Medicare. It’s a combined 15.3 percent of your gross income on top of ordinary income taxes. Fortunately, you can take half of that in an above-the-line deduction. (You’ll have to file Form 1040 Schedule SE — Self-Employment Tax — to claim it, but if you have self-employment income, you’ll have to file it anyway.)

Those aren’t the only self-employment costs eligible for an above-the-line deduction. If you have a self-directed retirement plan, such as a SIMPLE (Savings Incentive Match Plan for Employees) IRA or a Simplified Employee Pension (SEP), that’s an above-the-line deduction, too. If you pay for your own health insurance (including Medicare), you can deduct those premiums as well.

7. Student loan interest payments

Student loan payments restarted in October, though no one was forbidden to make payments during the COVID-19 pandemic. If you did make payments, the interest portion is an above-the-line deduction, which may soften the impact. There’s a limit to this deduction: $2,500.

8. Teacher expenses

If you’re a teacher and have to pay some expenses out of your own pocket — think books, organizational containers, toys or musical instruments — you can deduct up to $300. If you’re married to another teacher, you can jointly deduct $600.

Less common deductions

Are you an Olympic (or Paralympic) champion? You can deduct your winnings. Did you give your pay from jury duty to your employer because it was paying you? You can deduct that as well. Did you have supplemental unemployment benefit repayments? You can deduct those. All of the less-common deductions are outlined in IRS Publication 529 — Miscellaneous Deductions.

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John Waggoner is a contributing writer of all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously, he was a reporter for Kiplinger’s Personal Finance and USA Today and has written books on investing and the 2008 financial crisis. Waggoner’s USA Today investing column ran in dozens of newspapers for 25 years.