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?
a,
b.
c.
d. The contributions have no tax benefit in 2018 because the standard deduction is taken and charitable contributions are itemized deductions.
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