AGI Deductions Vs. From AGI Deductions (LO. 6)

Reba's 2019 income tax calculation is as follows:

Gross income		$120,000
Deductions for adjusted gross income		(3,000)
Adjusted gross income		$117,000
Deductions from adjusted gross income:
	Standard deduction	(12,200)
	(Total itemized deductions are $2,300)
Taxable income		$104,800

Before filing her return, Reba finds an $8,000 deduction that she omitted from these calculations. Although the item is clearly deductible, she is unsure whether she should deduct it for or from adjusted gross income. Reba doesn't think it matters where she deducts the item, because her taxable income will decrease by $8,000 regardless of how the item is deducted.

Complete the letter below to Reba which outlines the impact of the $8,000 missed deduction.

Dear Reba,

First, your assumption of a decrease in taxable income based on the following.

Individuals are always allowed to deduct qualified expenses incurred as deductions adjusted gross income. Individuals are allowed to deduct certain personal expenditures and other specified non-personal expenditures as deductions adjusted gross income. These deductions are commonly referred to as .

Inserting the missing $8,000 into the table below demonstrates how deductions can impact taxable income.

	Deduction For AGI		Deduction From AGI
Gross income	$		$
Deductions For AGI	$		$
Adjusted gross income	$		$
Deduction From AGI
Greater of:
Standard deduction	$		$
Itemized deductions
Taxable income	$		$

Note that the reason a deduction AGI does not impact taxable income is because the $8,000 addition to your does not exceed your .

Please do not hesitate to contact me if you have any questions.