9.7 Understanding Tax Savings

In your own words, explain why someone might choose to itemize their deductions instead of taking the standard deduction.

Imagine a taxpayer had $5,000 in charitable donations, $7,000 in mortgage interest, and paid $9,000 in state and local taxes. Would it be more beneficial for this taxpayer to itemize or take the standard deduction if they are single?

A married couple filing jointly has $15,000 in itemized deductions. Given the standard deduction amount, should they itemize or take the standard deduction? Explain your reasoning.

Briefly explain the difference between tax deductions and tax credits.

Imagine you made $40,000 during the last tax year and you are in the process of filing your taxes. You have the option of a $1,000 tax credit and a $1,000 tax deduction, which would you choose and why?

A friend tells you that non-refundable tax credits are not worth taking because you can’t get a refund. How would you respond to your friend to let them know you should still accept a non-refundable tax credit?

Why is tax avoidance considered legal while tax evasion is illegal?

Imagine you have a full-time job. According to the video, what are some legal ways you could reduce your taxable income?

Suppose a friend tells you they're not reporting all their income to avoid paying taxes. What advice would you give them and why?