Adjustment to Income vs. Standard Deduction

By: Mark Kennan | Reviewed by: Ryan Cockerham, CISI Capital Markets and Corporate Finance | Updated March 09, 2019

1040 and 1040A filers may claim the standard deduction.

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Though the Internal Revenue Service will come after you if you don’t report all your income, you’re not going to get a letter from them with a check for a bigger refund if you didn’t remember to claim all the deductions to which you’re entitled. Because it’s up to you to make sure you maximize your deductions, it’s important that you know the difference between adjustments to income and the standard deductions you can claim on your taxes and how they affect your tax return. Both reduce the amount of taxable income you have, but they do so in different ways.

Tip

Adjustments to income reduce your taxable income, but are not itemized deductions and not all taxpayers qualify for them. Standard deductions, on the other hand, also reduce taxable income, but are available to all taxpayers.

Understand Tax Adjustments vs. Deductions

The tax code contains two different types of tax breaks that reduce your taxable income: adjustments to income and itemized deductions. Adjustments to income are sometimes referred to as above the line deductions. You can claim the breaks for adjustments to income regardless of whether you itemize or claim the standard deduction.

Adjustments to income include traditional IRA contributions, student loan interest, the tuition and fees deduction and the educator expenses deduction. For example, if you have just a $3,000 traditional IRA contribution, you can still claim that deduction on top of the standard deduction for your filing status.

Choose the Standard Deduction or Itemize

You can only claim itemized deductions if you give up your standard deduction. Itemized deductions include charitable contributions, medical expenses, and state and local taxes. As a result, you must decide whether the sum of your itemized deductions is worth more than your standard deduction.

For example, if your standard deduction is $12,000 but you only have $7,000 of itemized deductions, you don’t get any tax benefit from those deductions. But, you could still benefit from any adjustments to income, regardless of whether you itemize.

Understand 2018 Standard Deduction Increases

As part of the new tax law, the standard deduction nearly doubles in size from 2017 figures. For the 2018 tax year, the standard deduction jumps to $12,000 for singles, $18,000 for heads of household and $24,000 for couples filing jointly. But the news isn’t all good when it comes to changes to the tax law.

For example, the deduction for moving expenses, previously an adjustment to income is eliminated for the 2018 tax year. However, under current tax law, the moving expenses deduction will return starting in the 2026 tax year.

Remember 2017 Standard Deductions

If you need to file back taxes, it's worth remembering that for tax year 2017, the standard deductions were much lower before recent tax reforms went into effect for the current tax year. For 2017 taxes, single filers were entitled to a standard deduction of $6,350 and couples using the married filing jointly status received a standard deduction twice as large at $12,700. Heads of household claiming the standard deduction received a $9,350 tax break.

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About the Author

Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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