Exemption amounts and itemized deductions are two types of reductions used to calculate taxable income.Which of the following are characteristics of these types of deductions?
I.Taxpayers deduct the larger of itemized deductions or the standard deduction.
II.Exemption amounts are dependent on amounts of expenditures for dependents.
III.Deductions for adjusted gross income are limited to those incurred in a trade or business,incurred in the earning of income,and certain specifically allowed personal expenses of individuals.

Question

Exemption amounts and itemized deductions are two types of reductions used to calculate taxable income.Which of the following are characteristics of these types of deductions?
I.Taxpayers deduct the larger of itemized deductions or the standard deduction.
II.Exemption amounts are dependent on amounts of expenditures for dependents.
III.Deductions for adjusted gross income are limited to those incurred in a trade or business,incurred in the earning of income,and certain specifically allowed personal expenses of individuals.
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Quizplus · Accepted Answer

Statement I is correct as taxpayers can choose to deduct the larger of itemized deductions or the standard deduction. 
Statement II is incorrect as exemption amounts are dependent on the number of dependents, not on their expenditures. 
Statement III is correct as deductions for adjusted gross income are limited to those stated in the statement.

Exemption Amounts and Itemized Deductions Are Two Types of Reductions