What's the Difference Between Above-the-Line and Below-the-Line Deductions?

Tax deductions are divided into two groups depending on where they appear on your return, with the dividing line being your adjusted gross income (AGI). Above-the-line deductions are subtracted from your gross income to arrive at your AGI, and you can claim them whether you take the standard deduction or itemize. Common above-the-line deductions include contributions to a traditional IRA, student loan interest, self-employed health insurance premiums, and HSA contributions. Below-the-line deductions are claimed after you've calculated your AGI, and they include the standard deduction or itemized deductions such as mortgage interest and charitable contributions. Because above-the-line deductions lower your AGI, they can also increase your eligibility for other tax benefits that phase out as income rises, making them especially valuable.