MODULE V
ADJUSTMENTS TO INCOME
OR DEDUCTIONS

By Norma Wahnon

Copyright 2012 Norma Wahnon

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INTRODUCTION

The Form 1040 formula, works with two main groups of deductions: “For AGI “or “above the line“ and “From AGI“ or “below the line “. The “For AGI “or “above the line“ group is located on page 1 of Form 1040. The “From AGI “or “below the line“ group is located on Page 2 of the Form 1040.

The AGI (Adjusted Gross Income) is reported on the last line of Page 1 of Form 1040. To understand how deductions and losses are grouped as indicated above it is important to analyze Section 62, Section 212, and Section 162 of the Internal Revenue Code.

Following is a simplified review of Section 62 and Section 212.

A. SECTION 62: DEFINITION OF THE ADJUSTED GROSS INCOME (AGI)

Adjusted Gross Income is a very important concept when applying the Form 1040 Formula because it affects the amount of allowable deductions such as those for charitable contribution, casualty losses, medical expenses, and miscellaneous other deductions. Deductions classified as “above the line“ are deducted from gross income to obtain the adjusted gross income, which is entered in the last line of the Page1 on Form 1040 and repeated on the first line of Page 2 of the same form.

Section 62 of the IRS Code lists the “for AGI “ or “above the line 37 “ deductions. Following is a partial list of allowed deductions: