ch3hw07a

ch3hw07a - Chapter 3 homework solutions 3. A tax deduction...

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Chapter 3 homework solutions 3. A tax deduction reduces taxable income before the determination of the tax liability. A tax credit reduces the tax liability. A tax credit reduces the tax liability dollar for dollar. A tax deduction will reduce the tax liability only proportionately based on a taxpayer's marginal tax bracket. A $1 deduction at the 35 percent tax bracket saves 35 cents in taxes while a $1 credit saves $1 in taxes. 7. Two rules may result in some taxpayers not being entitled to a standard deduction or only part of a standard deduction: a) Dependents have a special rule for computation of the standard deduction. b) Married couples filing separately could arrange their affairs to have one of the spouses take all the itemized deductions while the other uses the standard deduction, and the result would be a smaller taxable income than if they filed jointly. Special rules eliminate this possibility. 10. Taxpayers are allowed an additional standard deduction for being over age 65 or blind but those additional standard deductions can’t be taken for dependents with those characteristics. 13. Probably depending upon the circumstances. Although regulations state that ordinarily courses taken exclusively at night don’t qualify for full-time study, these regulations are very old (30 to 40 years old) and contemplate a time when night students were full time employees. Today some students (particularly graduate students) may have programs with courses given exclusively at night. 16. Any of the brothers except Amos may qualify for the exemption. A participant in a multiple support agreements must contribute at least 10% of the dependents support to claim the exemption. 19.
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ch3hw07a - Chapter 3 homework solutions 3. A tax deduction...

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