Sonya owes a deductible expense that she can pay either (and deduct) this year or next year. She is in the 24% marginal tax rate bracket. Which of the following statements about this payment is/are correct?
I.Deductions should always be taken as soon as possible. Sonya should pay the expense this year.
II.If Sonya expects to be in the 32% marginal tax rate bracket next year, she should pay the expense this year.
III.If Sonya expects to be in the 12% marginal tax rate bracket next year, she should pay the expense this year.
IV.If Sonya expects to be in the 24% marginal tax rate bracket next year, she should pay the expense this year.

Question

Sonya owes a deductible expense that she can pay either (and deduct) this year or next year. She is in the 24% marginal tax rate bracket. Which of the following statements about this payment is/are correct?
I.Deductions should always be taken as soon as possible. Sonya should pay the expense this year.
II.If Sonya expects to be in the 32% marginal tax rate bracket next year, she should pay the expense this year.
III.If Sonya expects to be in the 12% marginal tax rate bracket next year, she should pay the expense this year.
IV.If Sonya expects to be in the 24% marginal tax rate bracket next year, she should pay the expense this year.
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Quizplus · Accepted Answer

If Sonya expects to be in a lower tax bracket next year (12%), she should pay the expense this year to maximize the deduction at the higher rate. If she expects to be in the same bracket (24%), it doesn't matter when she pays it, but paying this year could be beneficial for cash flow or other reasons.

Sonya Owes a Deductible Expense That She Can Pay Either