Question

With the exception of rent/royalty expenses, investment interest expense is deducted (1) AGI while self-employed business expenses are deducted (2) AGI. (Enter only one word per blank.)

How are investment interest expenses and self-employed business expenses deducted concerning AGI?

a) (1) Before; (2) After
b) (1) After; (2) Before
c) (1) Along with; (2) After
d) (1) Before; (2) Along with

Answer 1

Investment interest expenses are deducted after calculating AGI, while self-employed business expenses are deducted before calculating AGI.

Step-by-step explanation:

When dealing with personal income taxation, different expenses are deducted at different stages in relation to Adjusted Gross Income (AGI). Investment interest expenses are typically deducted after AGI is calculated. This means you subtract these expenses from your total income to find your AGI first, and then you deduct investment interest expenses. On the other hand, self-employed business expenses are usually deducted before AGI. These expenses directly reduce your gross income to arrive at your AGI.

Therefore, the correct answer to the question is:

• (1) After; (2) Before