Adjustments to Income (Above-the-Line Deductions) 2025
Adjustments reduce gross income to arrive at AGI. Unlike itemized deductions, these are available regardless of whether you itemize. Reported on Schedule 1, Part II.
Traditional IRA Deduction
Deduct contributions to traditional IRA up to $7,000 ($8,000 if 50+). Key rule: If NEITHER you NOR your spouse is covered by a workplace retirement plan, the deduction is fully allowed regardless of income.
If you (or your spouse) are covered, the deduction phases out based on MAGI:
| Filing Status | Full Deduction | Partial Deduction | No Deduction |
|---|---|---|---|
| Single / HoH / MFS (not living w/ spouse) | ā¤ $79,000 | $79,001 ā $88,999 | ā„ $89,000 |
| MFJ / QSS (covered spouse) | ā¤ $126,000 | $126,001 ā $145,999 | ā„ $146,000 |
| MFJ (non-covered spouse, spouse IS covered) | ā¤ $236,000 | $236,001 ā $245,999 | ā„ $246,000 |
| MFS (living with spouse) | ā | $0 ā $9,999 | ā„ $10,000 |
Calculating the partial deduction (IRS Pub 590-A Worksheet 1-2):
Reduction = Max Contribution Ć (MAGI ā Phaseout_Start) Ć· $10,000(or $20,000 for MFJ covered)- Round reduction UP to next $10
Deduction = Max Contribution ā Reduction- If result is between $1ā$200, you may still deduct $200
- Non-deductible portion can still be contributed ā must file Form 8606 to track basis
"Covered" means: You or employer contributed to a 401(k), 403(b), SEP, SIMPLE, or defined-benefit pension during the year. Check W-2 Box 13 "Retirement plan" box.
Roth IRA Contribution Limits
| Filing Status | Full Contribution | Partial Contribution | No Contribution |
|---|---|---|---|
| Single / HoH / MFS (not living w/ spouse) | ā¤ $150,000 | $150,001 ā $164,999 | ā„ $165,000 |
| MFJ / QSS | ā¤ $236,000 | $236,001 ā $245,999 | ā„ $246,000 |
| MFS (living with spouse) | ā | $0 ā $9,999 | ā„ $10,000 |
Roth IRA contributions are never deductible.
Student Loan Interest Deduction
Deduct up to $2,500 of student loan interest. Phaseout: MAGI $85K-$100K ($170K-$200K MFJ). Not available for MFS.
Self-Employed Health Insurance
Deduct 100% of health insurance premiums for self-employed, spouse, and dependents. Limited to net profit from the business.
Self-Employment Tax Deduction
Deduct 50% of SE tax (the "employer" portion). This is an above-the-line deduction.
SEP/SIMPLE/Qualified Retirement Plan Contributions
Self-employed deduction for contributions to SEP-IRA (up to 25% of net SE income) or SIMPLE IRA.
HSA Deduction
Deduct HSA contributions. 2025 limits: $4,300 self-only, $8,550 family. Catch-up (55+): +$1,000. Must be enrolled in a high-deductible health plan (HDHP).
2025 HDHP requirements: minimum annual deductible $1,650 (self) / $3,300 (family); maximum out-of-pocket $8,300 (self) / $16,600 (family). Employer + employee may both contribute in the same year; employer contributions are not included in employee income. Nonmedical withdrawals: taxable as income + 20% penalty if under 65 (no penalty if 65+, permanently disabled, or death). HSA contributions are NOT subject to the use-or-lose rule (unlike FSAs).
Penalty on Early Withdrawal of Savings
Deduct CD early withdrawal penalties and similar bank penalties (reported on 1099-INT/1099-OID). Does NOT include IRA/retirement plan early-withdrawal penalties (those are not deductible).
Alimony Paid (Pre-2019 Divorces Only)
Deductible only for pre-2019 divorce decrees (grandfathered). NOT deductible for post-2018 divorces. Recipient of pre-2019 alimony reports it as taxable income. Must report recipient's SSN and original agreement date on Schedule 1.
Educator Expenses
Up to $300 ($600 MFJ if both are educators, $300 per spouse) for unreimbursed classroom supplies (books, supplies, computer equipment/software, professional development). Health/PE expenses deductible only to extent athletics-related; home-schooling materials do NOT qualify. Must work ā„900 hours in K-12; college instructors do NOT qualify.
Moving Expenses (Active Duty Military Only)
Deductible only for active-duty Armed Forces members relocating under permanent change of station (PCS) orders (Form 3903). Reimbursed expenses not deductible. 2025 standard mileage: $0.21/mile. Non-military employer moving reimbursements = taxable wages.
Reservist Travel (Line 12)
Reservists traveling >100 miles from home for drill (overnight stay) may deduct unreimbursed travel expenses (transportation, lodging, 50% meals) above-the-line via Form 2106.
OBBBA Schedule 1-A Deductions (2025-2028)
These are additional above-the-line deductions on the new Schedule 1-A (flow to Form 1040 Line 13b). All require valid SSN (ITIN does not qualify).
| Deduction | Max | Phaseout starts (MAGI) | Phaseout mechanics |
|---|---|---|---|
| Qualified tips | $25,000 per return | $150,000 ($300,000 MFJ) | Reduce $100 per $1,000 (floored) over threshold; MFS not eligible |
| Qualified overtime | $12,500 ($25,000 MFJ) | $150,000 ($300,000 MFJ) | Reduce $100 per $1,000 over threshold; MFS not eligible. Only FLSA-required overtime premium (the "half" of time-and-a-half) |
| Car loan interest | $10,000 per return | $100,000 ($200,000 MFJ) | Reduce $200 per $1,000 (ceiling) over threshold; MFS each gets $10,000. Vehicle: new, ā¤14,000 lb, US final assembly, first lien, VIN reported |
| Enhanced senior (65+) | $6,000 ($12,000 MFJ if both; $6,000 if one) | $75,000 ($150,000 MFJ) | Reduce by 6% of excess until eliminated |
Tips: cash tips incl. credit card/electronic/tip pool; customer must pay voluntarily (not mandatory service charges). Self-employed limited by net SE income. Overtime: only the FLSA-required premium portion (typically the "half" of time-and-a-half above 40 hrs); employer-voluntary extra pay does NOT qualify. Car loan: loan incurred after Dec 31, 2024; vehicle final assembly in US; original use begins with taxpayer; >50% personal use.
Excess Business Loss Limit (2025)
Non-corporate taxpayers (incl. sole proprietors) may only use business losses to offset nonbusiness income up to: $626,000 MFJ / $313,000 other filing statuses (2025). Excess carries forward as an NOL.