Deductions Mastery

Put these in the correct tax filing order (left to right)

• Subtract tax credits from tax liability to determine if owe/refund.

• Determine AGI

• Use taxable income to determine tax liability

• Determine taxable income by subtracting deductions from AGI

• Determine if you will take the standard deduction or itemize

Is it better to have more or less taxable income? Explain

• Less taxable income because you will pay less in taxes.

• More taxable income because you will be taxed more.

Is it better to have more or less deductions?

• More because then your taxable income is less.

• Less because the your taxable income is more.

What is an itemized deduction?

• An itemized deduction is an expense that individuals can claim on their federal income tax returns to reduce their taxable income.

• An itemized deduction is a penalty that individuals have to pay on their federal income tax returns.

• An itemized deduction is a fixed amount that individuals can claim on their federal income tax returns.

• An itemized deduction is a credit that individuals can claim on their federal income tax returns.

When should someone their itemize deductions instead of taking the standard deduction?

• When the total of itemized deductions is less than the standard deduction amount.

• When the total of itemized deductions is equal to the standard deduction amount.

• When the total of itemized deductions is greater than the standard deduction.

• When the total of itemized deductions is $2,000 or less.

What is the difference between a tax deduction and a tax credit?

• A tax deduction increases taxable income, while a tax credit directly increases the amount of tax owed.
• A tax deduction has no impact on taxable income, while a tax credit increases taxable income.
• A tax deduction reduces the amount of tax owed, while a tax credit increases taxable income.
• A tax deduction reduces taxable income, while a tax credit directly reduces the amount of tax owed.

Calculate the total itemized deduction if you have $5,000 in home mortgage interest, $1,200 in medical expenses, and $3,000 in charitable contributions.

• $9,200

• $10,500

• $8,200

• $7,000

List three examples of eligible deductions for itemizing.

• Mortgage interest, State and local taxes, Charitable contributions

• Car insurance, Medical expenses, Grocery bills

If the total of your itemized deductions is $15,000 and the standard deduction is $13,850, should you take the standard or should you itemize?

• Standard
• Itemize

Explain the difference between standard and itemized deductions.

• Standard deductions are expenses that can be deducted, while itemized deductions are fixed amounts set by the IRS.

• Standard deductions are fixed amounts set by the IRS, while itemized deductions are specific expenses that can be deducted.

• Standard deductions are only applicable to businesses, while itemized deductions are for individuals.

• Itemized deductions are specific expenses that can be deducted, while standard deductions are variable amounts based on income.