Each year, Tom and Cindy Bates normally have itemized deductions of $20,000, including a $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: in early January 2018, they pay their pledge for 2017; during 2018, they pay the pledge for 2018; and in late December 2018, they prepay their pledge for 2019.
Explain what the Bateses are trying to accomplish.
What will be the tax saving if their marginal tax bracket is 24% for all three years? (Assume that the standard deduction amounts for 2018 and 2019 are the same.)
Write a letter to Tom and Cindy Bates (8212 Bridle Court, Reston, VA 20194) summarizing your analysis.
Solution:
1) By concentrating the payment of three years of charitable contributions (2017,2018,2019) int one year, this will allow the Bates to itemized their deductions from AGI in 2018, otherwise their itemized deductions (normally $20,000) are of no benefit, as they do not exceed the standard deductions ( $12,700 for 2017 and $24,000 for 2018 ).
2) Presuming the $20,000 of normal itemized deductions already includes one year of church pledge payments, the additional payment of $8,000 ($4,000for 2017 and $4,000 for 2019) yield itemized deductions $28000 ($20,000+$8,000) for 2018. This exceed the standard deduction that would have been claimed by the amount of $4,000($28,000-$24,000) Therefore, the tax saving by concentrating the charitable contribution becomes $960 ($4000*24%). The same tax that would ave been paid will result for 2017 and 2019as the standard deduction is claimed for each of these years.
3) Letter of Tom and Cindy Bates is shown as follows:
January 25, 2019
Mr. and Mrs. Tom Bates
8212 Bridle Court
Reston, VA 20194
In response to your inquiry in regarding in the federal income tax consequence s of consolidating your charitable contribution for 2017, 2018 and 2019 into a single year (2018). Here is the brief summary of the outcomes:
Each year, Tom and Cindy Bates normally have itemized deductions of $20,000, including a $4,000 pledge...
Each year, Tom and Cindy Bates (married filing jointly) normally have itemized deductions of $20,000 (which includes an annual $4,000 pledge payment to their church). Upon the advice of a friend, they do the following: In early January 2019, they pay their pledge for 2018; during 2019, they pay the pledge for 2019; and in late December 2019, they prepay their pledge for 2020. a. What are the Bateses trying to accomplish? . b. What would the Bates' total itemized...
Problem 3-43 (LO. 9) Each year, Tom and Cindy Bates (married filing jointly) report itemized deductions of $20,000 (which includes an annual $4,000 pledge payment to their church). Upon the advice of a friend, they do the following: In early January 2019, they pay their 2018 pledge; during 2019, they pay the 2019 pledge; and in late December 2019, they prepay their 2020 pledge. a. What are the Bateses trying to accomplish? b. What would the Bates' total itemized deductions...
Problem 3-52 (LO.9) Each year, Tom and Cindy Bates (who file married-filing jointly) report itemized deductions of $10,000, induding an annual $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: In early January 2017, they pay their 2016 pledge; during 2017, they pay the 2017 pledge; and in late December 2017, they prepay their 2018 pledge. a. What are the Bateses trying to accomplish? b. What would the Bates total itemized deductions be...
eBook X Betonmentse sono portals Post Atte x Calculator o cha Rias x + Problem 3-43 (LO. 9) Each year, Tom and Cindy Bates (married filing jointly) normally have itemized deductions of $22,000 (which includes an annual $4,000 pledge payment to their church). On the advice of a friend, they do the following: In early January 2020, they pay their pledge for 2019; during 2020, they pay their pledge for 2020; and in late December 2020, they prepay their pledge...
Each year, Andy and Bonnie Carter report itemized deductions of $20,000, including a $4,000 pledge payment to their church. Upon the advice of a friend, they do the following: in early January 2018, they pay their 2017 pledge; during 2018, they pay the 2018 pledge; and in late December 2018, they prepay their 2019 pledge. Explain what the Carters are trying to accomplish. Prepare a detailed calculation of the tax savings, if any, if their marginal tax bracket is 24%...