I need help with the first one This is how I got my numbers Ramon had AGI of $20
ID: 2565251 • Letter: I
Question
I need help with the first one
This is how I got my numbers
Ramon had AGI of $205,000 in 2017. He is considering making a charitable contribution this year to the American Heart Association, a qualified charitable organization. Determine the current allowable charitable contribution deduction in each of the following independent situations, and indicate the treatment for any amount that is not deductible currently. Ramon has decided to make his $123,000 gift to the American Heart Association in the form of cash. However, he is considering delaying his gift until next year when his AGI will increase to $300,000 and he will be in the 33% income tax bracket, an increase from his current-year income tax bracket of 28%. Assume a 6% discount rate. The present value factors, at a 6% discount rate, are as follows: PV Factor at 6% 0.9434 0.8396 0.7473 : Year : If required, round your final answers to the nearest dollar Ramon asks you to determine the tax savings from the tax deduction in present value terms if he were to make the gift this year, rather than delaying the gift until next year. For purposes of this analysis, ignore the potential impact of the overall limitation on certain itemized deductions. Total present value of tax savings from the tax deduction if made this year:$ 28,700X Total present value of tax savings from the tax deduction if made next year: $ 38,293Explanation / Answer
As per IRS, any amount of of charitable contribution, deduction of which cannot be taken this year due to limit will can be taken in your personal income tax return in any one year of next years.
In the first part, the individual will be taking deduction of $102,500 (50% of AGI) out of total contribution of $123,000. The remaining $20,500 can be taken in the next year. Total Present Value of Tax savings will be as follows:
Total Present Value of Tax savings = Present Value of Tax savings in the current year + Present Value of Tax savings next year on the deduction made this year.
Present value of tax savings in the current year = $28,700 (As correctly soved by you)
Present Value of Tax Savings next year = ($123,000 - $102,500) x 33% x 0.9434
= ($20,500) x 33% x 0.9434 = $6,382.101
Total Present Value of Tax Savings if contribution is made in current year = $28,700 + $6382.101 = $35,082