Question

In your own words please answer the following, or some of them:

5. How was the income tax formula for individuals changed for 2018 by the Tax Cuts and Jobs Act?

6. Why are some deductions called “above the line” deductions and others called

“below the line” deductions? What is the “line”?

7. 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?

8. What does it mean to say that a married couple filing a joint tax return has joint

and several liability for the taxes associated with the return?

Answer 1

Solution:-

5. How was the income tax formula for individuals changed for 2018 by the Tax Cuts and Jobs Act:-

The TCJA simplified the tax code by making it more advantageous for many filers to take the standard deduction, instead of itemized deductions. The TCJA expanded the standard deduction from $6,500 to $12,000 for single filers and $13,000 to $24,000 for joint filers in 2018.This near doubling of the standard deduction limited the value of itemized deductions, making it more attractive to use the standard deduction.

Additionally, under the TCJA, the three provisions that reduce household income taxes based on household size were consolidated into two: the personal exemption was eliminated, replaced by the aforementioned expanded standard deduction and an expanded child tax credit.

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

The line is adjusted gross income (AGI). AGI is considered the line because of the significance it plays in the amount of deductions allowed from AGI. For AGI deductions are called above-the-line deductions because they are deducted in determining AGI. FromAGI deductions are called below-the-line deductions because they are deducted after AGI has been determined. They are deducted from AGI to arrive at taxable income. Below-the-line deductions may be subject to limitations based on the taxpayer’s AGI.

7. 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:-

Married couples filing joint returns combine their income and deductions and agree to share joint and several liability for the resulting tax. Filing a joint return generally results in a lower tax liability than does filing separately due to more favorable tax rate schedules and higher phase-out thresholds for various tax benefits. However, a couple may prefer to file separate returns in certain circumstances for nontax reasons. For example, when a married couple is separatedbut the couple does not want to have anything to do with each other or when one spouse does not want to be liable for the tax liability of both parties, the couple may choose to file separately.

8. What does it mean to say that a married couple filing a joint tax return has joint and several liability for the taxes associated with the return:-

Each spouse is liable for the full amount of taxes owed on a joint return, regardless of which spouse earned the associated income.