AGI and Allowable Deductions

When we use the terms “above-the-line” and “below-the-line,” what does the “line” refer to? The answer is simple: the line is the demarcation between your adjusted gross income and taxable income. Your adjusted gross income (or AGI) is your gross income less any adjustments (or deductions) you claim. Your AGI is the figure you use to compute your taxable income. And your taxable income is the figure you use to ultimately determine your tax liability. Taxpayers should always aim to make their AGI as low as possible.  We’ve pointed out on several occasions that tax avoidance is the legal minimization of one’s tax burden. There is no offsetting legal principle that holds that a taxpayer must pay as much tax as is theoretically possible. In fact, there is a very real attitude that minimizing one’s tax liability is both wise and ethical. When we minimize our tax liability through legitimate means, we are exercising sound…

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