Lee's 2018 taxable income is $108,000 before considering charitable contributions. Lee is a single individual. She makes a donation of $20,000 to the American Heart Association in December 2018. By how much did Lee's marginal tax rate decline simply because of the donation?

Question

Quizplus · Accepted Answer

Charitable contributions are deducted from taxable income if the taxpayer itemizes deductions. However, the reduction in taxable income does not directly affect the marginal tax rate, which is determined by the tax brackets into which the taxpayer's income falls. The marginal tax rate is the rate at which the last dollar of income is taxed, and a deduction lowers taxable income but does not change the rate itself.

Lee's 2018 Taxable Income Is $108,000 Before Considering Charitable Contributions