In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
A) In arriving at taxable income, a taxpayer must choose between the standard deduction and itemized deductions.
B) In arriving at AGI, personal and dependency exemptions are subtracted from gross income.
C) In arriving at taxable income, a taxpayer must choose between the standard deduction and the deduction for qualified business income.
D) The tax formula does not apply if a taxpayer elects to claim the standard deduction.
E) None of these.

Question

Quizplus · Accepted Answer

In arriving at taxable income, a taxpayer must choose between the standard deduction and itemized deductions. Option B is incorrect because personal exemptions were abolished under the Tax Cuts and Jobs Act. Option C is incorrect because the deduction for qualified business income is a separate deduction that comes after AGI is calculated. Option D is incorrect because the tax formula still applies if a taxpayer elects to claim the standard deduction, as the standard deduction is simply a deduction that is subtracted from gross income to arrive at taxable income.

In Terms of the Tax Formula Applicable to Individual Taxpayers