Final answer:
If one spouse itemizes deductions on separate tax returns, the other spouse cannot claim the standard deduction. Adjusted Gross Income is gross income minus specific deductions, and the standard deduction or itemized deductions are subtracted from AGI to arrive at taxable income.
Step-by-step explanation:
The question you've asked is related to tax law, specifically the rules regarding itemized and standard deductions on separate tax returns for a married couple. When two individuals are married and file separately, if one spouse itemizes their deductions, the other spouse cannot claim the standard deduction and must also itemize their deductions. This is an IRS rule designed to prevent one spouse from getting a tax benefit by itemizing while the other takes the standard deduction, which would not be permissible if they were filing jointly.
Adjusted Gross Income (AGI) is an individual's total gross income minus specific deductions, and taxable income is AGI minus allowances for personal exemptions and itemized deductions or the standard deduction. Under normal circumstances, you do not start paying taxes on every single dollar earned because the standard deduction and personal exemptions lower your taxable income. However, if one chooses to itemize deductions, it must be more beneficial than the standard deduction.