Kelsey is a cash-basis, calendar-year taxpayer. Her salary is $60,000, and she is single. She plans to purchase a residence in 2019. She anticipates her property taxes and interest will total $11,000 in 2019. Each year, Kelsey contributes approximately $1,500 to charity. Her other itemized deductions total $2,000. For purposes of this problem, assume the 2018 standard deduction amount remains in effect for 2019.a.What will be her deductions from AGI in 2018 and 2019 if she contributes $1,500 to charity in each year?b.What will be her deductions from AGI in 2018 and 2019 if she contributes $3,000 to charity in 2018 but makes no contribution in 2019?c.What will be her deductions from AGI in 2018 and 2019 if she makes no contribution in 2018 but contributes $3,000 to charity in 2019?d.Why
does option C yield the largest deductions over time?
What will be an ideal response?
| a. | Potential itemized deduction | $ 3,500 | $14,500 |
| Standard deduction | 12,000 | 12,000 |
| Deduction from AGI (larger of above) | $12,000 | $ 14,500 |
| Deductions across two years | $ 26,500 |
| b. | Potential itemized deduction | $ 5,000 | $13,000 |
| Standard deduction | 12,000 | 13,000 |
| Deduction from AGI (larger of above) | $12,000 | $ 13,000 |
| Deductions across two years | $ 25,000 |
| c. | Potential itemized deduction | $ 2,000 | $16,000 |
| Standard deduction | 12,000 | 12,000 |
| Deduction from AGI (larger of above) | $12,000 | $ 16,000 |
| Deductions across two years | $ 28,000 |
| d. | The contributions have no tax benefit in 2018 because the standard deduction is taken and |
charitable contributions are itemized deductions.
Business
