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It has been suggested that tax policy favors deductions for AGI compared to itemized deductions. Describe two ways in which deductions for AGI are treated more favorably than itemized deductions.
Explain two ways in which the deductions for AGI (Adjusted Gross income) are treated more favorably than itemized deductions.
Explanation of Solution
Explain two ways in which the deductions for AGI (Adjusted Gross income) are treated more favorably than itemized deductions as follows:
When the standard deduction exceeds the itemized deduction before receiving any tax benefits from the deduction, the deductions for AGI (Adjusted Gross income) are treated more favorably than itemized deductions. In contract, the business deductions are deductible for AGI in ordered to reduce the taxable income without subject to overall tax limit. At the same time, itemized deductions are subject to many mechanical limitations including ceiling and floors, whereas the business deductions are not subject to these limits.
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Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage