Standard deduction v personal exemption 3035 and 3045

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Standard Deduction v. Personal Exemption (¶3035 and ¶3045) 5. Standard v. Itemized Deductions (¶3035) 6. Partial Standard Deduction (¶3035) 7. Standard Deduction for Dependent Child with Unearned Income (¶3365) 8. Spouse Exemption on Separate Return (¶3045) 9. Additional Old Age and Blindness Standard Deduction (¶3035) 10. Dependency Exemption: Support Test (¶3225) 11. Dependency Exemption: Birth and Death (¶3225) 12. Dependency Exemption: Full-Time Students (¶3225) 13. Joint Return of Dependent (¶3225) 14. Multiple Support Agreement: Requirements (¶3225) 15. Multiple Support Agreement: Allowable Exemptions (¶3225) 16. Dependency for Pre-1985 Divorce (¶3225) 17. Dependency for Pre-1985 Divorce (¶3225) 18. Dependency for Post-1984 Divorce (¶3225) 19. Comparing Pre-1985 and Post-1984 Divorce Exemptions (¶3225) 20. Calculating Standard Deduction and Exemptions (¶3035 and ¶3225) 21. De fi nition of Filing Status (¶3301) 22. Determining Filing Status (¶3301) 23. Head of Household Expenses v. Support Test Expenses (¶3345) 24. Return Requirements: Minimum Gross Income (¶3375) 25. Return Requirements: Dependents with Unearned Income (¶3375) 26. Return Requirements: Refunds and Credits (¶3375) 27. Return Requirements: Taxable Income (¶3375) 28. Tax Tables v. Tax Rate Schedules (¶3385 and ¶3395) 29. Self-Employment Tax Limit (¶3405) 30. Answers to Questions Tax Formula Components An understanding of the components of the tax formula is required in order to properly determine a 1. taxpayer’s tax liability. It is particularly important to distinguish between deductions toward adjusted gross income and deductions from adjusted gross income. Deductions for and from Adjusted Gross Income Deductions for adjusted gross income are primarily of a business nature. Deductions from adjusted gross 2. income are primarily of a personal, nonbusiness nature. Deductions for adjusted gross income are allowable
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35 Instructor’s Manual © 2009 CCH. All Rights Reserved. Chapter 3 whether or not a taxpayer itemizes while deductions from adjusted gross income are valuable only if they exceed the standard deduction. Certain itemized deductions, personal exemptions, and credits are based on adjusted gross income. Deduction v. Tax Credit A tax deduction reduces taxable income before the determination of the tax liability. A tax credit reduces 3. 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. Deductions for Adjusted Gross Income Terminology Other terms used to describe deductions for adjusted gross income include deductions from gross income 4. and business deductions. Standard Deduction v. Personal Exemption The standard deduction allows taxpayers to earn an amount of income with no tax being assessed. One 5.
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