Answered: Impact on Taxes. From question 24, if…

Impact on Taxes. From question 24, if Lawrence had forgotten a $5000 tax credit (instead of a $5000 tax deduction), how would his taxes be affected?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Impact on Taxes. From question 24, if Lawrence had forgotten a $5000 tax credit (instead
of a $5000 tax deduction), how would his taxes be affected?

Expert Solution

Step 1

The tax liability of a person depends upon the filing status and the taxable income. The tax deduction lowers the taxable income of the taxpayer and ultimately the tax liability also reduces. The tax rules provide deductions to the taxpayers which are reduced from the gross income. The tax credit and tax deduction both are different.

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