Taxing Definitions

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Keep calm, it’s only statistics, and according to author Rex Stout, there are only two kinds – the kind you make up and the kind you look up. The IRS generates statistics (presumably of the second kind) at a heady pace, and the Spring 2017 Statistics of Income Bulletin (which you can look up here) contains preliminary data for tax year 2015. Here are questions to test your knowledge of tax items found on individual federal returns.

1. What percentage of 2015 individual federal income tax returns claimed itemized deductions?

Per the Spring 2017 bulletin

 

2. Of returns filed for calendar year 2015, do you think the largest itemized deduction was for or ?

 

3. Average adjusted gross income reported on 2015 individual income tax returns was $67,565, and average taxable income was $63,691. What do you think the average income tax was on those taxable returns for 2015?

Per the Spring 2017 bulletin

 

4. The data for 2015 federal income tax returns was based on returns processed between January and late September of 2016. Can you name three tax items that are, in general, found disproportionately on 2015 returns filed after late September?

Per the Spring 2017 bulletin

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Note: Taxing Lessons provides a summarized version of sometimes lengthy court decisions. The full case may include facts and issues not presented here. Please use the link provided in the post to read the entire case.

This information should not be considered legal, investment, or tax advice. Taxing Lessons and Top Drawer Ink Corp. do not provide legal, investment, or tax advice. Always consult your legal, investment, and/or tax advisor regarding your personal situation.

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Itemized deductions were claimed on 29.5% of all returns for tax year 2015.

Total deductions, the sum of standard deductions (comprised of the basic and additional standard deductions) and total itemized deductions, increased 3.5% to $2,108.1 billion in tax year 2015. Most tax returns (69.2%) claimed a standard deduction, but standard deductions accounted for 42.9% of total deductions. The total amount of the standard deduction claimed rose 2.6%, although the average deduction increased only 1.4% to $8,691.

Itemized deductions were claimed on only 29.5% of all returns for tax year 2015, but they accounted for more than half (57.1%) of total deductions. The amount of itemized deductions claimed increased 4.2% to $1,203.2 billion, while the average increased 2.6% to $27,053.

The remaining 1.3% of the returns did not need to claim either a standard deduction or itemized deductions because no AGI was reported.

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Total taxes paid, which includes state and local income and sales taxes and is the largest itemized deduction, increased 6.2% (over 2014) to $539.8 billion. Interest paid, the second largest itemized deduction, decreased 1% from the previous year to $294.5 billion. Mortgage interest accounted for 94.6% ($278.5 billion) of the total interest paid deduction.

Average income tax for taxable returns rose 4.2% over 2014 to $14,653.

While the preliminary 2015 estimates are intended to represent a full year of taxpayer reporting, they are actually based on returns processed for tax administration purposes between January and late September of 2016. These returns are then weighted to represent a full year of taxpayer reporting. In general, returns processed during the remainder of each year tend to have somewhat different characteristics compared to returns processed earlier.

These characteristics include, for example, disproportionately large amounts of investment income, passive losses, and alternative minimum tax.

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