Taxing Options and Deductibility

Brenda and her sister Mallory have been discussing the advice they received from their financial planners. Brenda would rather have an adjustment for adjusted gross income (AGI); whereas, Mallory declares she would rather have an adjustment from AGI. With which sister would you agree? Why?

Now Brenda and Mallory are discussing their babysitting jobs. Brenda says the people she works for are wonderful because they only tell her what time to arrive; the rest is up to her. Mallory asked if Brenda's employers withheld taxes from her payments. Brenda told Mallory that she has learned that her employer may deduct charitable contributions as part of her itemized deductions. Whereas Mallory said that she is trying to raise funds to buy a new house. Her church takes a collection for her, and Brenda contributes $3,000.

• What is the deductibility of Brenda's contribution?
• What impact does Brenda's level of income have on her AGI and charitable contributions?
• Should Mallory be having her taxes withheld? Why?
• Under what circumstances can Mallory have her taxes withheld? Explain.