Pat and Joy are considering contributing $5,000 to their church. This contribution will bring their total...
Pat and Joy are considering contributing $5,000 to their church. This contribution will bring their total itemized deductions to $10,000. Assuming they are in the 15% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to their church?
Homework Answers
It is assumed that Pat and Joy are married and filing income tax returns jointly for 2019. Standard deduction that can be claimed by married filing joint returns for 2019 is 24,400. If they contribute $5,000 to church, their itemized deduction would become $10,000. The greater of standard deduction or itemized deduction is deducted from Adjusted gross income to arrive at taxable income.
Since standard deduction is more than itemized deduction, Pat and joy will opt standards deduction over itemized deduction. As a result, contribution to church will not bring any tax savings for the couple as contribution affects itemized deduction and not standard deduction.
So, Pat and Joy will not save anything in taxes by contributing to church.
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