 Looking at the income tax formula we're focused online to that being the adjustment to income remembering that the income tax formula the first half of it at least is in essence a modified income statement although a strange one where we have income minus the equivalent of the expenses being the deductions careful deductive reasoning gets to the equivalent of net income that being taxable income our objective flipped on its head instead of us trying to maximize the net income we're trying to minimize have as low as possible the taxable income now when we think about the adjustments to income this is in essence a deduction but you can also think of it as a contra income account for example because we have income minus the adjustments to income gets to the adjusted gross income or agi the agi is an important number because when we look at phase outs for deduction phase outs due to income level credit phase outs due to income level they're generally based on the adjusted gross income agi as opposed to the top line the income line also note that the adjustments to income do not have the same kind of threshold that they have to clear as do the itemized deductions having to clear the standard deduction before we get a benefit from the adjustments to income so if we qualify for them we typically get typically get a benefit from them also note the adjustments to income might be called above the line deductions or schedule one deductions so if we look at the first page of the form 1040 we're focused down here on line 10 adjustments to income schedule one line 26 if we look at the schedule one page two we're focused here on the penalties on early withdrawal of savings and the alimony paid so if we're thinking about the penalties for early withdrawal these might be penalties that are applied to you from the financial institution depending on the type of of items that you are putting your money into sometimes you're kind of locking your money into the financial institution and telling them i'm not going to take the money out take the money just for a certain time period that usually results in a higher interest rate that you'll be able to earn on your investment and that's due to because the bank is able to take that money and say well if you promise that you're not going to pull it out then they can invest it somewhere and and they have you know it affects their reserves how much reserves they basically have to hold on to and so they can make more money with it if they're confident that you're going to you're going to leave it in there for a longer period of time which results in higher interest payments so if you take the money out early then you might be subject to penalties so then we have the alimony so we talked before on the income side of the alimony situation if you have a divorce type of situation then you could have money going from one spouse to another spouse and the question is is the one that's paying the money able to get a deduction for that payment and is the one that's receiving the money required to include it in income so it's just like a normal kind of financial transaction from the iris perspective they have the leverage on the one that's paying because if you're paying the money then you then if you were able to get a deduction that would be good for the one that's receiving the money they would like to receive the money of course but not have to include it in income so it wouldn't be a taxable income type of scenario so you'll recall that when we looked at the income side that there was a cutoff date where before that date there was a big emphasis on the distinction between the payments and you might say why does it matter what you call it and money is going from one person to the other but it was important what you called it for taxes being either alimony or child support because if it was alimony then it's something that the payer could deduct and the recipient would have to include an income and in that case just like a normal financial transaction the iris would say hey you have to tell us who you gave the money to because if we can't get our taxes from you we want to get it from the recipient the person who received the money so you got to put the social security number in there however if it was child support then the person paying the money doesn't get the deduction the person receiving the money doesn't have to record it in income the iris is basically not getting involved in the situation for that and then there was a big kind of problem in terms of well how do we categorize something as child support versus alimony which wasn't always clear in this in the divorce agreement and so on but after the cutoff date they basically are saying that the iris is just going to stay out of these payments altogether so whether it be alimony or child support the person paying doesn't get a deduction the person receiving doesn't have to include it in income now when this happened a lot of people thought that that was kind of unfair to the person paying the money because they're the ones that would benefit if they get a deduction however you would think that if the the actual contract happened or the divorce happened after the cutoff date that it would be a more simple kind of scenario and the agreement would then reflect the fact that the person paying doesn't get the tax benefit that they would have before right and if you have the contract before when there was a benefit to the person paying if it was categorized as alimony it would result in a different agreement in an ideal world if everything was everybody knew everything about the situation and was being honest about everything you would think the agreement would just change and according to what the taxes are so i would think it being more simple would be easier for a divorce type of situation so i think it would be and the way they put it in there kind of makes sense of course because if you came to the agreement before the cutoff date and you and you have these tax consequences as you made the agreement then you would that would alter the agreement you would expect and so you don't want to change the tax law retroactively but then going forward you would think that it would make more sense for the iris to just stay out of the whole thing all together and not have this complication between alimony and child support and the new agreements would then reflect the current tax situation so the agreements would look different you would you would expect but that's just my thought on it i don't know what do i know