Certified Relocation Professional (CRP) Practice Exam

The treatment of moving expenses as "above the line" means what for the adjusted gross income?

1. They directly reduce adjusted gross income

2. They are considered taxable income

3. They have no effect on adjusted gross income

4. They must be reported as additional income

The correct answer is: They directly reduce adjusted gross income

When moving expenses are treated as "above the line," it means that they can be deducted from the individual's gross income before calculating the adjusted gross income (AGI). This deduction feature is beneficial because it directly reduces the AGI, thus potentially lowering tax liability and eligibility for certain credits and deductions that are phased out at higher income levels. In this context, "above the line" deductions are seen as advantageous because they can be claimed regardless of whether a taxpayer itemizes deductions on their tax return or takes the standard deduction, thereby providing broader access to tax relief for those who incur moving-related expenses. This stands in contrast to other options, which do not accurately convey the nature of the "above the line" treatment of moving expenses. For example, moving expenses being considered taxable income, having no effect on AGI, or needing to be reported as additional income would misrepresent how these deductions function in the tax framework. In summary, the treatment of moving expenses as "above the line" highlights their role in reducing the adjusted gross income, thereby facilitating possible savings on overall taxes.