Why Might Someone Choose to Use Itemized Deductions Instead of Taking

question 114

Multiple Choice

Why might someone choose to use itemized deductions instead of taking the standard deduction offered by the IRS?

• A)It is easier to calculate your itemized deductions versus the standard deduction.
• B)You may have a lower tax liability if you itemize instead of using the standard deduction.
• C)Married taxpayers must use the itemized deductions only.
• D)Most computer tax software automatically itemizes deductions.
• E)both B and C are correct.

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Definitions:

Coupon Bond

A bond that entitles the holder to receive periodic interest payments (coupons) and the principal back at maturity.

Effective Yield

Effective yield is the total yield on an investment, taking into account the effects of compounding interest or reinvestment over a given period.

Maturity Date

The date on which a financial obligation must be repaid in full.

Present Discounted Value

The present worth of a future amount of money or series of cash inflows, discounted at a given rate of return.