Individual taxation
The Deduction Menu
Sort each deduction by where it lands: above the line to reach AGI, then the greater of the standard deduction or itemized below it.
How the exam words it
- -The stem lists expenses and asks for AGI or taxable income.
- -It asks whether an item is an adjustment (above the line) or an itemized deduction.
- -Itemized categories appear (medical over 7.5 percent of AGI, capped SALT, mortgage interest, charitable) and it asks the deductible amount.
- -An OBBBA deduction is in play: the deduction for qualified tips or the additional senior deduction.
The playbook
- 1Take above-the-line adjustments first (educator expenses, HSA contributions, the self-employment tax and health insurance deductions, student loan interest) to arrive at AGI.
- 2Compare the standard deduction to total itemized deductions and take the larger of the two.
- 3Apply the itemized floors and caps: medical only above 7.5 percent of AGI, state and local taxes capped, mortgage interest on acquisition debt, charitable subject to AGI ceilings.
- 4Layer the OBBBA deductions: qualified tip income and qualified overtime are deductible within limits, and an additional senior deduction is available to taxpayers 65 and older, both phasing out at higher income.
The trap
Deducting medical or charitable amounts before applying the floors and ceilings. Medical counts only above 7.5 percent of AGI, and the standard deduction is often larger than the itemized total anyway.
How the exam varies it
The same pattern, re-skinned along these axes:
Above-the-line adjustment versus itemized deductionStandard deduction versus itemizingThe traditional itemized categories versus the OBBBA tip and senior deductions
Drill this pattern
8 questions of The Deduction Menu from across the AUD topics. Clear it by getting 5 right with a streak of 3.