Problem:
You and your spouse are preparing your first income tax return as a married couple. You want to save some money and prepare the tax return yourself, so you need to gather information on the possible credits and deductions that are available to married couples and decide the best way to file. You know you can either itemize your deductions or use the standard deduction, depending on the amount of itemized deductions. You believe it would be best to itemize deductions to have the biggest deductions and thus pay the lowest taxes you can by lowering your taxable income.
Using the library, Internet, and all other resources, do the following:
- Give an example of 3 deductions and 3 tax credits and how they decrease your tax liability.
- Deductions: Medical and dental expenses, mortgage interest, charitable contributions and student loan interest
- Credits: Child credit, earned income credit, Hope scholarship credit, and Lifetime learning credit
- Explain the difference between a tax deduction and a tax credit
Objective: Identify common income tax minimization strategies