In December 2014, Arnold is considering one last financial decision for 2014. He has $5,000 that he would like to spend before the end of the year. His options include donating the money to a qualified charity and receiving an itemized deduction) or using the money as a down payment on the purchase of $30,000 of equipment for his business. If he purchases the equipment, he will receive an 8% tax credit for the entire purchase price. He does not need the equipment until early next year, so the purchase at this time is not critical. Assume that Arnold is in the 33% marginal tax rate bracket in 2014 and itemizes his deductions. Which option will provide him with the greatest tax benefit? Explain and show any calculations that support your answer.

Question

Quizplus · Accepted Answer

The Answer of In December 2014, Arnold is considering one last financial decision for 2014. He has $5,000 that he would like to spend before the end of the year. His options include donating the money to a qualified charity and receiving an itemized deduction) or using the money as a down payment on the purchase of $30,000 of equipment for his business. If he purchases the equipment, he will receive an 8% tax credit for the entire purchase price. He does not need the equipment until early next year, so the purchase at this time is not critical. Assume that Arnold is in the 33% marginal tax rate bracket in 2014 and itemizes his deductions. Which option will provide him with the greatest tax benefit? Explain and show any calculations that support your answer.

In December 2014, Arnold Is Considering One Last Financial Decision