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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 $104,000, contribute $8,450 to charity, and pay $3,400 in state income taxes.

Required:

  1. Estimate Trevor’s taxable income for year 1 and year 2 using the 2019 amounts for the standard deduction for both years.
  2. 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 2019 amounts for the standard deduction.
  3. Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $3,200 and $28,000, respectively, each year. Estimate Trevor’s taxable income for each of the next two years (year 1 and year 2) using the 2019 amounts for the standard deduction and also assuming Trevor makes the charitable contribution of $8,450 and state tax payments of $3,400 in each year.
  4. Trevor plans to purchase a residence next year, and he estimates that additional property taxes and residential interest will cost $3,200 and $28,000, 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 2019 amounts for the standard deduction.

Solutions

Expert Solution

Answer:

Note:-Standard deduction is $12,200 and itemized deduction would be $11,850 (i.e. $8,450+3,400), so he should choose standard deduction.

Note: Combing the charitable contributions into one year will make itemized deductions for year 1 $20,300 (i.e. 8,450+8,450+3,400) so for year 1 claim itemized deduction and year two standard deduction.

Note: Itemized deduction of $43,050 (i.e. 28,000+3,200+8,450+3,400) vs standard deduction of $12,200 he will choose the itemized deduction

Note:- Trevor will be using itemized deductions in the both the years

Year 1 itemized deductions= $8,450+8,450+3,400+3,200+3,200+28,000= $54,700

Year 2 itemized deductions= $3,400+28,000= $31,400

ekkarill92 answered 2 years ago
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