Tax Deductions
Amounts subtracted from income that reduce the taxable base, such as the standard or itemized deductions.
REG loves to test the sequencing of deductions, not just the totals. Expect a fact pattern listing several outlays and asking which lower AGI versus which sit “below the line.” The “tell” is that above-the-line deductions (educator expenses, HSA contributions, the deductible half of SE tax, student-loan interest) hit before AGI on Schedule 1, so they help everyone and shrink the AGI used in later phaseouts; itemized deductions land after AGI on Schedule A and only help if they exceed it. For 2025 that standard figure is $15,750 single / $31,500 MFJ (the 2025 OBBBA bumped it above the originally indexed $15,000 / $30,000 some banks still print).
The classic trap is treating a deduction like a credit: a deduction saves only your marginal rate times the amount, while a credit cuts tax dollar-for-dollar. Watch the AGI floors — medical expenses deductible only above 7.5% of AGI — and note the old 2%-floor miscellaneous deductions are now permanently repealed (TCJA suspended them through 2025; OBBBA made that permanent). Hook: above-the-line “adjustments” adjust AGI; itemized deductions only fight the standard deduction.
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