Question & Answer

For tax purposes, why is the married filing jointly tax status generally preferable to the married filing separately filing status? Why might a married taxpayer prefer not to file a joint return with the taxpayer’s spouse?

Is a qualifying relative always a qualifying person for purposes of determining head of household filing status?

True or False. For purposes of determining head of household filing status, the taxpayer’s mother or father is considered to be a qualifying person of the taxpayer (even if the mother or father does not qualify as the taxpayer’s dependent) as long as the taxpayer pays more than half the costs of maintaining the household of the mother or father. Explain.

What requirements do an abandoned spouse and qualifying surviving spouse have in common?

Isabella provides 30 percent of the support for her father Hastings, who lives in an apartment by himself and has no gross income. Is it possible for Isabella to claim her father as a dependent? Explain.

How do parents determine who claims the child as a dependent if the child is a qualifying child of both parents when the parents are divorced or file separate tax returns?

How do two taxpayers determine who has priority to claim a person as a dependent if the person is a qualifying child of both taxpayers when neither 

In general terms, what are the differences in the rules for determining who is a qualifying child and who qualifies as a dependent as a qualifying relative? Is it possible for someone to be a qualifying child and a qualifying relative of the same taxpayer? Why or why not?

Compare and contrast the relationship test requirements for a qualifying child with the relationship requirements for a qualifying relative.

Emily and Toni are recently married college students. Can Emily qualify as her parents’ dependent? Explain.

If a person meets the qualifying relative tests for a taxpayer, is that person automatically considered to be a dependent of the taxpayer? Explain.

Identify three ways taxpayers can pay their income taxes to the government.

What federal income-related taxes are (or might) taxpayers (be) required to pay? In general terms, what is the tax base for each of these other taxes on income?

What is the difference between a tax deduction and a tax credit? Is one more beneficial than the other? Explain.

If taxpayers are not allowed to claim deductions for dependency exemptions, is it necessary to determine who qualifies as a taxpayer’s dependent(s)? Briefly explain.

Why are some deductions called “above the line” deductions and others called “below the line” deductions? What is the “line”?

Are taxpayers allowed to deduct any from AGI deductions that are not itemized deductions?  Explain.

How do taxpayers determine whether they should deduct their itemized deductions or utilize the standard deduction?

What is the difference between gross income and adjusted gross income, and what is the difference between adjusted gross income and taxable income?

Compare and contrast for and from AGI deductions. Why are for AGI deductions likely more valuable to taxpayers than from AGI deductions?

Are taxpayers allowed to deduct net capital losses (either net long-term capital loss in excess of net short-term capital gain or net short-term capital loss in excess of net long-term capital gain)? Explain.

Are all capital gains (gains on the sale or disposition of capital assets) taxed at the same rate? Explain.

Is it easier to describe what a capital asset is or what it is not? Explain.

Why should a taxpayer be interested in the character of income received? 

All else being equal, should taxpayers prefer to exclude income or defer it? Why?