Your clients, Ed and Renee, both in their 20s, were married in 2018 Their AGI is approximately $135,000, and historically they have used the standard deduction. They have come to you in October 2020 for advice on how to minimize the amount of federal income tax that they will pay on their 2021 income. As part of that discussion, they have the following question. Please address the question below in enough detail that they leave the meeting with a good understanding of the tax code.

They are in the market to buy a house. Renee tells you that she knows that mortgage interest and property taxes are tax deductible, but she is unclear what the other itemized deductions are. They are looking to buy a house in January of 2021, anticipating that they will borrow approximately $450,000 with a 4% annual percentage rate. The house they are considering is located in south Minneapolis where property taxes on such a house are approximately $3000 per year. Their yearly state income tax is approximately $4000, and they pay approximately $2000 annually in state sales taxes. The couple typically contributes $500 per year to local charities. The couple would like to know the approximate tax savings if they buy a house in January 2021, because so many people have told them that buying a house can greatly reduce your income taxes. Assume that the standard deduction in 2021 will be $24,400 for a married couple filing jointly. Assume 2021 tax rates are the same as 2020 tax rates.

(a) Compute the estimated tax savings from owning a home in 2021.

(b) Offer one good suggestions (there are four, possibly more) on what they can do to increase the amount of their itemized deductions in 2021, thereby decreasing their income tax. Be specific and use actual/estimated dollar figures in your discussion as appropriate. Assume that the couple does in fact buy a home in January