How do taxpayers determine whether they should deduct their itemized deductions or utilize the standard deduction? Under what circumstances would you expect the after-tax return from an investment in a capital asset to approach that of tax-exempt assets (assuming equal before-tax rates of return)?
How do taxpayers determine whether they should deduct their itemized deductions or utilize the standard deduction?
Under what circumstances would you expect the after-tax
How do taxpayers determine whether they should deduct their itemized deductions or utilize the standard deduction?
Answer:
Itemizing allows taxpayers to deduct certain expenses from their taxable income.
Standard deduction is a amount that non-itemizers may subtract from their income before income tax is applied.
Taxpayers generally deduct the greater of:
(1) the applicable standard deduction or
(2) their total itemized deductions, after limitations.
However, taxpayers that do not want to bother with tracking itemized deductions may choose to deduct the standard deduction, even when itemized deductions may exceed the standard deduction.
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