Deductions for adjusted gross income 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.Taxpayers deduct the larger of deductions for adjusted gross income or the standard deduction
III.Deductions for adjusted gross income are limited to those incurred in a trade or business, incurred in the earning other forms of income, and certain specifically allowed personal expenses of individuals.

Question

Deductions for adjusted gross income 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.Taxpayers deduct the larger of deductions for adjusted gross income or the standard deduction
III.Deductions for adjusted gross income are limited to those incurred in a trade or business, incurred in the earning other forms of income, and certain specifically allowed personal expenses of individuals.
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Quizplus · Accepted Answer

Statement I is correct in that taxpayers have the option to deduct the larger of itemized deductions or the standard deduction. Statement II, however, is incorrect as deductions for adjusted gross income are separate from the standard deduction and taxpayers cannot choose the larger of the two. Statement III is correct in that deductions for adjusted gross income are limited to certain specific expenses related to earning income or conducting business.

Deductions for Adjusted Gross Income and Itemized Deductions Are Two