Gerald bought his first home last year and has a mortgage. He will itemize his deductions on his tax return for the first time. Which of the following is affected by itemized deductions? a) Adjusted gross income b) Taxable income c) Total income d) Federal withholdings

The correct answer is letter "B": Taxable income.

Explanation:

While filing a tax return, taxpayers have the option of submitting deductions. Taxpayers can claim for a standard deduction or an itemized deduction. By selecting the itemized deduction, taxpayers have the opportunity of accessing a list of deductions based on different expenses incurred given a tax period.

Medical expenses, home mortgage interest, property, state, and local income taxes or charitable contributions are expenditures that could be subtracted from the taxpayers Adjusted Gross Income (AGI) to reduce their tax bills.

B. Taxable income

Explanation:

Itemized deductions are alternate forms of deduction (standard deduction is the first option) that a tax payer can use to reduce his taxable income. Itemized deductions are particularly elected by tax payers when standard deduction is lower than the itemized deductions. The itemized deductions contain a list of expenses that includes donations to charities, medical expenses and interest paid on mortgage.

So itemized deductions will affect Gerald's taxable income.