Question

A strategy taxpayers can use to maximize the use of the standard deduction is to:

1) Spread out charitable contributions across several years.
2) Purchase stock in a child's name.
3) Reduce the amount of charitable contributions made in the year.
4) Use the cash method to concentrate multiple years' deductions, such as charitable contributions, in a single year.
5) Employ a child in a business.

Answer 1

A strategy taxpayers can use to maximize the use of the standard deduction is to employ a child in a business.

Step-by-step explanation:

A strategy taxpayers can use to maximize the use of the standard deduction is to employ a child in a business. By hiring a child and paying them a reasonable salary, the taxpayer can deduct the wages as a business expense. This reduces the amount of income subject to tax, effectively lowering the taxpayer's overall tax liability.

For example, if a parent owns a small business and hires their child to do administrative work, they can pay the child a salary and deduct it as a business expense. This reduces the parent's taxable income and allows them to benefit from the standard deduction or other deductions and credits.

It's important to note that the child must perform actual services for the business, and the salary paid must be reasonable for the type of work performed. Additionally, the child must report the income on their tax return and pay appropriate taxes on the wages.