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Tax Tip of the Week
For the week of
October 28, 2002

Consider "bunching" your itemized deductions

Have you found yourself with itemized deductions you can't use? The problem arises because several types of deductions have minimum amounts you must reach before you can take the deduction. For example, you can deduct medical expenses only to the extent they exceed 7.5% of your adjusted gross income (AGI). Miscellaneous deductions must exceed 2% of AGI to be deducted.

In cases like these, you should consider "bunching" your deductions. This means adjusting the timing and payment of discretionary expenses so that you bunch them together in one tax year. The last few months of the year is a good time to consider this strategy.

Example. Say you've had unusually heavy medical expenses this year that have brought you very close to the 7.5% threshold. You might consider accelerating routine medical expenses from early next year into December 2002. Perhaps you could arrange for your next dental checkup, your next eye examination, and your purchase of new glasses to take place in 2002. Then these become 2002 expenses which might be deductible if they put you over the 7.5% threshold.

On the other hand, if you expect lower AGI or especially heavy expenses in certain categories next year, you might benefit by postponing some expenses until 2003. Whatever your situation, it's worth considering your opportunities for bunching. It might help you salvage itemized deductions that would otherwise be lost. Call us for more information about this tax-cutting strategy.

Prior Tax TipsClick here to view previous tax tips.

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The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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