Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next...
Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $80,000, contribute $8,000 to charity, and pay $2,800 in state income taxes. Required: Estimate Trevor’s taxable income for year 1 and year 2 using the 2020 amounts for the standard deduction for both years. Now assume that Trevor combines his anticipated charitable contributions for the next two years and makes the combined contribution in December of year 1. Estimate Trevor’s taxable income for each of the next two years using the 2020 amounts for the standard deduction. Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $2,000 and $10,000, respectively, each year. Estimate Trevor’s taxable income for each of the next two years (year 1 and year 2) using the 2020 amounts for the standard deduction and also assuming Trevor makes the charitable contribution of $8,000 and state tax payments of $2,800 in each year. Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $2,000 and $10,000, respectively, each year. Assume that Trevor makes the charitable contribution for year 2 and pays the real estate taxes for year 2 in December of year 1. Estimate Trevor’s taxable income for year 1 and year 2 using the 2020 amounts for the standard deduction.
Homework Answers
As per the HOMEWORKLIB POLICY, I am answering the first two questions:
a. Standard deduction is $12,400 itemized deduction would be $10,800 so he would choose standard deduction.
| Year 1 | Year 2 | |
| AGI | $80,000 | $80,000 |
| Standard deduction | ($12,400) | ($12,400) |
| Taxable Income | $67,600 | $67,600 |
b. Combining the charitable contributions into one year will make itemized deductions for year 1 $18,800 so for year 1 claim itemized and year 2 standard.
| Year 1 | Year 2 | |
| AGI | $80,000 | $80,000 |
| (1) Standard deduction | ($12,400) | ($12,400) |
| (2) Itemized deduction | ($18,800) | ($2,800) |
| Greater of (1) & (2) | ($18,800) | ($12,400) |
| Taxable Income | $61,200 | $67,600 |
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