 Most of this information comes from the form 1040 tax year 2022 instructions instructions for schedule one additional income and adjustments to income adjustments to income section which you could find at the IRS website irs.gov irs.gov looking at the income tax formula we are now focused on the adjustments to income remembering that the first half of the income tax formula is in essence an income statement although a strange one where we have income minus the equivalent of the expenses being the deductions getting us down to the bottom line the equivalent of net income this being the taxable income remembering that our objective is upside down that is we want the taxable income as low as possible as opposed to in a normal situation where we want the net income as high as possible so in prior sections we looked at the income line we would like to have income of course but we would like it to be exempt for taxes so we can have the taxable income in our formula as low as possible when we're looking at the adjustments to income it could be a little bit confusing because in essence these are thought of or you can think of them as deductions even though we can name it adjustments to income because we're decreasing getting down to another subtotal of adjusted gross income and then we're going to deduct the standard deductions or the itemized deductions to get down to the taxable income now one of the reasons you might call it adjustments to income instead of like a deduction some form of deduction is because it's leading to that subtotal of adjusted gross income and that subtotal is usually the number as opposed to the top income number used to do phaseouts when we have phaseouts of deductions or phaseouts of credits as people's income goes up they phase out the benefits you might get for certain credits and certain deductions and they usually base that on some format of the adjusted gross income instead of the top line of income however you might also hear the adjustments to income be called the above the line deductions or you might hear them call schedule one deductions the name could change as time passes we now have a schedule one which we didn't have before so if that sticks around for a while they might be called you know you might refer to them as like the schedule one deductions but the point is they are different from the itemized or standard deductions that are on down below now just from the deductions that most people kind of come to mind most people think about think about it thinking about it jimmy the first deductions people usually think about are like itemized deductions meaning the home mortgage interest the property taxes the charitable deductions which are generally the itemized deductions which you would only take if they were greater than the standard deduction the standard deduction being dependent upon filing status principally we'll talk more about itemized deductions later the adjustments to income or the above the line or schedule one deductions are are good in the sense that if you have those deductions or if you're capable of taking those deductions you don't have that same limitation you don't have the limitation of needing to clear the standard deduction before you start getting the benefits from the above the line deductions the adjustments to income one of the primary examples would be like an ira deduction that's the one that probably comes to mind most often for the adjustments to income now also just remember that when we're thinking about deductions in general that they are different from the credits on down below which is an important distinction if you got one dollar of deduction versus one dollar of a credit you would rather have the dollar credit because that's going to have a greater impact a dollar for dollar decrease in the tax that you would owe or an increase in the refunds you would get whereas a decrease in the form of a deduction is just going to decrease the taxable income the amount of actual benefit you get from that tax will then be dependent upon the tax rates the progressive tax system that is being applied to that dollar although it gets more complex than that because oftentimes the credits have income phaseouts and whatnot so it gets kind of messy in terms of well what if my credit gets phased out my deduction doesn't get as phased out and so on and so forth so that's the general idea let's take a look at some of the items and the adjustments to income there's usually less of them uh than than some other formats of deductions and credits so let's look at those lying 10 on the form 1040 adjustments to income notice is coming from schedule one now