What is considered an "above-the-line" deduction?

An "above-the-line" deduction refers to deductions that reduce a taxpayer's gross income, which in turn lowers their adjusted gross income (AGI). This type of deduction is valuable because it is available to all taxpayers, regardless of whether they itemize their deductions or take the standard deduction.

Examples of above-the-line deductions include contributions to retirement accounts, student loan interest, and certain qualified business expenses. These deductions are taken into account before the computation of AGI and help provide a more accurate depiction of income for tax purposes.

The other options do not fit this definition as neatly. For instance, deductions from capital gains are not considered above-the-line deductions, and while itemized deductions reduce taxable income, they do so after the AGI has been calculated. Deductions related to mortgage interest are typically itemized deductions, which apply specifically to taxpayers who choose not to take the standard deduction. Thus, the definition of above-the-line deductions aligns perfectly with the choice that indicates they are deductions that reduce gross income.