What is a common expense that qualifies as an adjustment to income?

Self-employment tax is indeed a common expense that qualifies as an adjustment to income. When a taxpayer is self-employed, they are required to pay self-employment tax, which covers Social Security and Medicare taxes. The IRS allows self-employed individuals to deduct the employer-equivalent portion of the self-employment tax when calculating their Adjusted Gross Income (AGI). This deduction can help reduce the overall tax burden for self-employed individuals by lowering their taxable income.

In contrast, investment losses, luxury car expenses, and personal living expenses do not qualify as adjustments to income. Investment losses are generally subject to specific capital loss limitations and cannot be directly deducted from ordinary income. Luxury car expenses usually pertain to depreciation limits and various business-use restrictions, while personal living expenses are non-deductible and do not affect income calculations for tax purposes.