Each year, Tom and Cindy Bates (married filing jointly) report itemized deductions of $20,000 (which includes an annual $4,000 pledge payment to their church). Upon the advice of a friend, they do the following: In early January 2019, they pay their 2018 pledge; during 2019, they pay the 2019 pledge; and in late December 2019, they prepay their 2020 pledge.
a. What are the Bateses trying to accomplish?
b. What would the Bates' total itemized deductions be if all three church pledge payments were made in 2019?
Assume that the itemized deductions of $20,000 already included one year of the church pledge payments.
What will be the Bates' tax saving if their marginal tax bracket is 24% for all three years?
(Assume that the standard deduction amounts for 2019 and 2020 are the same).
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