Tax Adjustments include which items?

• A. Income growth rate
• B. Deductions, credits, adjustments
• C. Tax credits only
• D. Investment returns

Answer: (B)

Tax adjustments are the tools used to lower tax liability, either by reducing the income that’s taxed or by reducing the tax owed itself. They fall into three main categories: deductions, credits, and adjustments. Deductions lower your taxable income, credits directly reduce the amount of tax you owe, and adjustments (above-the-line adjustments) modify gross income to reach adjusted gross income. Because all three play a role in how taxes are calculated, this broader view best fits what tax adjustments include. The other options don’t fit: the income growth rate is just a metric of earnings, not a tax adjustment; investment returns are results that can influence taxes but aren’t adjustments themselves; and focusing only on tax credits omits deductions and adjustments that also affect tax outcomes.