"Is it OK to take a $16K insurance deduction, and also put $20K into my spouse's individual (traditional) 401k in order to get a $36K deduction on schedule 1?"
No. The sum of line 16 and line 17 is not permitted to exceed the $20,000 of net earnings. The sum of lines 15, 16 and 17 is not permitted to exceed net profit.
The maximum possible deduction on Schedule 1 for these items would be $35,000 as follows:
Line 16: $4,000
Line 17: $16,000
Line 20, $15,000 if you were both over age 50 in 2023 and MAGI is below $116,000, (a $7,500 traditional IRA contribution each)
