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Itemizing Deductions

Certain kinds of deductions are called itemized deductions. If you have enough of them to beat the standard deduction, it's usually a good idea to itemize. For most taxpayers, purchasing a home makes itemizing worthwhile. Here are some other popular itemized deductions from the IRS

Fewer taxpayers benefit from itemizing deductions then standard deductions. The standard deductions are even higher for taxpayers age 65 and older and those who are legally blind. Itemizing generally pays off only if your qualifying expenses total more than the standard deduction for your filing status.

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Higher standard deductions

$5,350 for Single and Married Filing Separately,

$7,850 for Head of Household,

$10,800 for Married Filing Jointly and Qualifying Widower

The statuses above mean that fewer taxpayers benefit from itemizing deductions. The standard deductions are even higher for taxpayers age 65 and older and those who are legally blind. Itemizing generally pays off only if your qualifying expenses total more than the standard deduction for your filing status.

Deductions Standard

Deductions Overlooked

Bunching Deductions

When deciding whether or not to itemize deductions, your year-end strategy should focus on bunching, the practice of timing expenses to produce lean low profit and fat high profit years. In 1 year, you would try to amass as many deductible expenses as possible. For example, you can time your fourth-quarter state estimated tax payment and certain medical procedures to ensure the expenses are paid when they will result in the greatest tax benefit. The goal is to surpass the standard deduction amount and claim a larger deduction.

In alternating years, you skimp on deductible expenses to hold them below the standard deduction amount because you get credit for the full standard deduction regardless of how much you actually spend. In the lean year, year-end plan, stress pushing as many deductible expenses as possible into the following fat year when they'll have some value.

Accelerating Deductions

Accelerating deductions is 1 method of trimming taxable income and your tax bill for the current year. Some examples:

• If you're allowed to pay your real estate tax in 2 installments — for example, December and June — consider paying the full year's tax in December.

• You can make your last state estimated tax payment in December rather than the following January.

• If your current-year medical expenses are close to or exceed 7.5% of your adjusted gross income (AGI), but are normally below the 7.5% threshold, try to move next year's expenses to this year. For example, purchase glasses and prescription drugs or get your physical before the end of December.