Explain why you would prefer to have an expense labeled as an adjustment to income instead of being labeled as a deduction. List two types of individuals who are most likely to take itemized deductions. Be specific.
Explain why you would prefer to have an expense labeled as an adjustment to income instead of being labeled as a deduction. List two types of individuals who are most likely to take itemized deductions. Be specific.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Explain why you would prefer to have an expense labeled as an adjustment to income instead of being labeled as a deduction. List two types of individuals who are most likely to take itemized deductions. Be specific.
Expert Solution
Step 1: INTRODUCTION
There are two ways in which you can reduce the tax liability. The first one is by reducing the taxable income. If you reduce your taxable income, then the tax liability will be reduced. Reduction in taxable income can be achieved by making some adjustments in income.
The second way is to claim deductions. It can happen in two ways- standard deduction and itemized deduction.
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