How to Lower Your Adjusted Gross Income on Tax Returns

Retirement savings can reduce adjusted gross income.

retirement Coin box pink pig and hand image by yellowj from

Your total income minus any allowable additions or deductions equals your adjusted gross income. This number affects many of your allowable itemized deductions on your Form 1040, Schedule A, such as medical and dental expenses, miscellaneous expenses and employee business expenses. Since these deductions are subject to a minimum of a certain percentage of your adjusted gross income, reducing this number may allow you to take a higher deduction, saving you even more on your taxes.

Make Retirement Plan Contributions

Contributions to a 401k plan are deducted from the income reported to you on your yearly W-2 form. These contributions directly reduce your adjusted gross income. In addition, contributions to a traditional deductible individual retirement account do the same. Roth IRA contributions are not tax deductible and therefore have no effect on adjusted gross income.

Contribute to a Health-care Savings Account

A health-care savings account is similar to an IRA account, except it isn't primarily for retirement savings. If you purchase your own high-deductible health insurance plan, you are eligible for an HSA. Money can be used from the HSA to pay for medical expenses that are below your deductible amount. Any contribution to the HSA is tax deductible, reducing your adjusted gross income.

Deduct Alimony Paid

If you are divorced and required to pay your spouse alimony, the alimony you pay is deductible from your income and will reduce your adjusted gross income. Child support is different; it is not deductible from your income as an adjustment.

Lower Self-Employment Income

Be aggressive in deducting business expenses. If you can document the deduction, make sure you take it. Self-employment income adds directly to your adjusted gross income, so reducing it by claiming all potential expenses will lower the amount. In addition, a business loss is subtracted from your adjusted gross income. Structure your expenses to provide the maximum reduction in the year that you need it.

Photo Credits

  • retirement Coin box pink pig and hand image by yellowj from

About the Author

Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.