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The Tax Cuts and Jobs Act of 2017 trimmed tax rates and significantly boosted the standard deduction, thus greatly reducing the number of taxpayers eligible to benefit from charitable deductions.
To determine the amount that she may deduct as a charitable contribution, Abby must subtract the ordinary gain inherent in the inventory (the $200,000) from the inventory's fair market value (the $600,000). Thus, the amount of Abby's gift is $400,000 (fmv of $600,000 minus inventory's inherent ordinary gain of $200,000).
If the amounts of the itemized deductions and the standard deduction do not differ much, the taxpayer may take the standard deduction to reduce the possibility of adjustment by the Internal Revenue Service (IRS). The amount of the standard deduction cannot be changed following an audit unless the taxpayer's filing status changes.
Did you make a charitable contribution in 2021? Learn about the special tax break for donations made last year on your taxes.
An average tax rate is the ratio of the total amount of taxes paid to the total tax base (taxable income or spending), expressed as a percentage. [2] Average tax rates is used to measure tax burden of individuals and corporations and how taxes affect the individuals and corporations ability to consume.
However, taxpayers pay no tax on income covered by deductions: the standard deduction (for 2022: $12,950 for an individual return, $19,400 for heads of households, and $25,900 for a joint return), or more if the taxpayer has over that amount in itemized deductions. Amounts in excess of this are taxed at the rates in the above table.
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