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    Tax Credit & Deduction

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    Please help me with the following questions. I am having some difficulty approaching them.

    The IRS code provides for deductions and credits.
    - List 5 possible deductions.
    - List 3 possible tax credits.
    - Compare and contrast a $10,000 adjustment, $10,000 tax credit and $10,000 of itemized deductions.

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    Solution Preview

    List 5 possible deductions:

    Deductions imply amounts that are allowable on Schedule A - itemized deductions. They are used to reduce taxable income in amounts beyond the standard deduction. Refer to the 2011 Form 1040, page 2, line 40 where the standard deduction for a single person is $5800. When the total on Schedule A exceeds $5800, the larger amount of deductions can be used to lower taxable income.
    Source: http://www.irs.gov/pub/irs-pdf/f1040.pdf

    Typical Schedule A deductions include:
    - State income taxes paid
    - Real estate ...

    Solution Summary

    This solution discusses possible tax credits and deductions under the IRS code, as well as a comparison of a $10,000 adjustment, $10,000 tax credit and $10,000 of itemized deductions.

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