Tax deductions allow you to reduce the amount of your income that is subject to income tax. These deductions are based on a variety of factors. Some refer to the expenses you pay during the year, while others are set by the government and are not related to the costs you incur. Since each deduction has different criteria, the amount you request is also based on whether you can meet all the requirements.
Adjusted gross income, or AGI, starts with your gross income and is then reduced by certain “above the line” deductions. Some common examples of deductions that reduce adjusted gross income include contributions to the 401 (k) plan, contributions to health savings accounts, and educators' expenses. In addition, your adjusted gross income is the starting point for calculating your taxes and determining your eligibility for certain tax credits and deductions that you can use to help lower your overall tax bill.
