John is entitled to an itemized deduction of $5,000 for the current year. (John is able to itemized his deductions.) He can also exclude $5,000 of interest income from his gross income. He is also entitled to an income tax credit in the amount of $4,000 that will be fully utilized. John’s marginal tax rate is 22%. He lives in a state without a state income tax. If John must choose between the deduction, exclusion and the credit because he can not claim all of them, he would ordinarily prefer them in which order (from best tax benefit to least)?

Answer rating: 100% (QA)

The John should first prefer to go with taking income tax credit of 4000 As this ... View the full answer