If your itemized deductions seem to constantly fall short of the minimum requirement, or if you feel like you aren’t getting the full tax benefit of those barely-there deductions, there’s a strategy you can use to get more out of your annual tax return. It’s called deduction bunching, and it involves making payments, purchases, or donations in larger amounts and at targeted times, so that at the end of the year, you have more deductions to use to reduce your taxable income.
What does that mean in practice? If you’re a regular contributor to charity, and tend to donate something each month, in December, you could pay the following year’s donation in a lump sum, doubling your total contribution for the current year. Deduction bunching can also work for medical expenses. If given the choice between paying in a lump sum or stretching payments out through multiple years, choose the lump sum, if possible—and enjoy the tax benefits.
Wondering how deduction bunching applies to your situation? Give Taxation Solutions, Inc. a call. We’re Cincinnati’s source for knowledgeable and skilled tax help, and we’ll be happy to take a look at your case.