Final answer:
The statement is false. Taxpayers must choose between the standard deduction and itemized deductions after determining their adjusted gross income, which already includes above-the-line deductions. Deductions for AGI and the standard deduction are separate components in the income tax formula.
Step-by-step explanation:
The statement that a taxpayer must choose between deductions for adjusted gross income (AGI) and the standard deduction is false. Deductions for AGI, also known as above-the-line deductions, are specific expenses that can be deducted from a taxpayer's total income to determine AGI. These are beneficial as they decrease AGI and thus potentially lower the amount of income subject to taxation. After determining the AGI, taxpayers have the option to subtract either the standard deduction or itemized deductions from their AGI to arrive at the taxable income. The choice between the standard deduction and itemizing deductions comes into play here, not between AGI deductions and the standard deduction.
On the tax form, AGI is calculated after accounting for various income sources and above-the-line deductions. Following that, taxpayers decide whether to further reduce their AGI by selecting the standard deduction or itemizing their deductions if that would provide a greater deduction amount. The exemptions are another concept which, in some years, are applicable, further reducing the taxable income. However, exemptions have been suspended under the tax law changes in effect from 2018 through 2025.
The final tax liability is computed by applying the relevant tax rates to the taxpayer's taxable income, which already reflects either the standard or the itemized deductions. Credits and other taxes such as the alternative minimum tax may also affect the overall tax due.