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Itemized Deduction Introduction

Itemized Deductions Topics * Back to the Fall Tax Planning Guide Index * Forward to Medical Expense Deductions

Itemized deductions are tax savers, too. Be sure to deduct all you have coming to you. To claim certain types of itemized deductions, your total expense must be more than a "floor" amount set by law. For instance, your medical expenses must exceed 7.5% of your AGI. Your unreimbursed employee business expenses and other miscellaneous expenses combined are deductible only to the extent they exceed 2% of AGI. One way to deduct more in these categories is to "bunch" two years of expenses into one year by:

  1. Paying 2000 miscellaneous expenses, such as professional dues, subscriptions, and investment expenses in late 1999
  2. Scheduling elective surgery, dental work, and eye appointments for late in 1999
  3. Making payments for 2000 medical and long-term care insurance early

If your total itemized deductions are equal to or slightly less than the standard deduction, bunching other deductions not subject to the floor can give you a tax benefit. Consider taking a standard deduction every other year and bunching expenses to get the largest itemized deduction the other years. Consider this:

  1. Prepaying 2000 annual contributions to charity in 1999, using a credit card if you wish.
  2. Paying state and local taxes early by making the January 2000 payment in December 1999.
  3. Increasing your state and local withholding for the rest of the year.
  4. Making your January 2000 mortgage payment or home equity payment in late 1999 to give you more interest deduction in 1999.

Most of these items rob Peter to pay Paul - they will reduce the tax you pay this year at the expense of paying more of next year's taxes. These tactics will have to be repeated next year to get a normal deduction.

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