As the standard deduction creeps up and mortgage interest
payments creep down, something surprising is happening to many tax
returns: People who always thought they would be itemizing
deductions are finding themselves in a position where it doesn't
pay for them to do so.
They're taking the standard deduction, but they are still
regretting the deductions they can't take.
Now, tax advisers are recommending a new solution that can keep
people from losing deductions. "Bunch" deductions together every
other year, they suggest. Itemize in those years when the
deductions are heaviest, and take the standard deduction in between.
Marvin Weisbrod, vice president of technical services for
Triple Check Income Tax Services, suggests using this
every-other-year approach to maximizing your writeoffs.
This plan goes a step further than first-generation "bunching"
techniques that tax experts started talking about a few years ago
when Congress put floors on miscellaneous deductions and raised the
floor under medical deductions.
Under current tax laws, miscellaneous deductions are only
deductible to the extent that they exceed 2 percent of adjusted
gross income. Medical expenses are deductible to the extent they
exceed 7.5 percent of your adjusted gross income.
So the pros have been telling us to "bunch" these deductions.
Pay insurance premiums so that they fall more heavily in
alternative years. Use those years to replace your contact lenses,
catch up on all of your routine checkups, and time, to the extent
possible, your voluntary medical expenses to fall more heavily in
these alternate years.
H & R Block's Income Tax Guide, for example, lists more than
100 deductible medical expenses you might not have thought were
legitimate, like special mattresses, lead paint removal,
chiropractic fees and birth control bills.
Miscellaneous deductions are similarly "bunchable." Every other
year, go down the list of possibilities, from safe deposit fees to
professional magazine subscriptions to tax preparation charges. In
many cases, the person you are sending these fees to may be
bunching his or her own return and would be happy to coordinate
alternative years with you.
But these special-situation deductions are limited in scope and
not the most productive places to bunch. For that, determine if you
are a borderline standard-deduction user.
If you are, bunch as many deductions as possible in the
alternative years when you don't take the standard deduction. …