Area 4: Federal Taxation of Individuals (22-32%)
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Gross Income − Above-the-Line Deductions
AGI − (Standard Deduction or Itemized Deductions) − QBI Deduction
Lesser of: 20% of QBI OR 20% of Taxable Income before QBI deduction
Subject to W-2 wage and UBIA limits for taxpayers above income thresholds
| Category | Deduction | Limitation |
|---|---|---|
| Medical | Unreimbursed medical expenses | Exceeds 7.5% of AGI |
| Taxes | State/local income or sales + property taxes | SALT cap: $10,000 |
| Interest | Home mortgage interest | On up to $750K of acquisition debt |
| Charitable | Cash to public charities | 60% of AGI |
| Charitable | Capital gain property to public charities | 30% of AGI |
| Casualty | Federally declared disaster losses | Exceeds $100 per event + 10% AGI |
Major above-the-line deductions (adjustments to gross income). These reduce AGI like ACID dissolves income.