Please see this LINK for more information and Table 1.
Explain Connecticut adjusted gross income (CT AGI), which is the basis for calculating taxable income subject to Connecticut’s income tax. What does it mean if an exemption or deduction is above or below the line?
The starting point for determining CT AGI is federal AGI. To calculate CT AGI, a taxpayer modifies his or her federal AGI by adding and subtracting specified income and expenses. For some filers, CT AGI is further reduced by a personal exemption to determine Connecticut taxable income.
Exemptions and deductions reduce the amount of income subject to tax. Exemptions reduce income by excluding a portion of it from the tax while deductions do so by subtracting all or a portion of an expense from income. Exemptions and deductions can either be “above-the-line” or “below-the-line,” meaning they are claimed before or after calculating AGI (i.e., the “line”).
Federal “above-the-line” exemptions and deductions are generally incorporated into Connecticut income tax calculations because they are claimed before calculating federal AGI. They include deductions for educator expenses, health savings account contributions, student loan interest, and moving expenses. Alternatively, federal “below-the-line” exemptions and deductions are not included in Connecticut’s state income tax calculation because they are claimed after calculating federal AGI. This includes the standard deduction and itemized deductions for medical and dental expenses, home mortgage interest, and gifts to charity, among others.
FEDERAL ADJUSTED GROSS INCOME
To calculate federal AGI, taxpayers list the total income they received for the tax year in specified categories. They then apply certain “above-the-line” deductions and report the adjusted amount (federal AGI) on lines 37 and 38 of federal tax form 1040. This adjusted amount is the basis for calculating CT AGI. The income categories and deductions used to calculate federal AGI for the 2015 tax year are shown in Table 1.
