Scott Thomas, ChFC®, CAP®, CKA®, RICP®

Bunching Your Itemized Deductions

Bunching Itemized Deductions for Tax Planning

Facts indicate there will be fewer taxpayers itemizing their taxes due to larger standard deduction amount and other changes. About 33% itemized in 2017 and in 2018 forward only expected to be 16%.

Many taxpayers will fall a little under the Standard Deduction aka SD amounts from their itemized deductions (mortgage interest + real estate & state taxes (limited $10K) +charitable gifts) so Single SD= $12,000 and married SD= $24,000.  If your age 65 or older get extra deduction added on single currently $1300 extra and married $2500 extra.  Here is an idea called “bunching” or “loading the box” where a taxpayer pushes together deductions from multiple years into one year periodically.  Example of how this works:  married couple $150,000 income and $7K interest expense, $5K real estate tax, $10K charitable or total itemized $22K.  Change up the timing of real estate tax payments to every other year double down $10K and same $7K interest and then double down charity or utilize Donor Advised Fund $20K for total every other year $37K.  Same money just timed differently and extra $13K deduction every other year. Translates to $2,860 every other year in tax savings or over 10 year period $14,300 of reduced tax payments.

No products to buy. No lock up your money in annuities. No legal work or complex planning required here. It would be advisable to seek advice from a professional on doing this is the “most optimized” way. 

Here is You Tube example I created to help see bunching in action.

https://youtu.be/LOOT4L-HXZA

https://youtu.be/LOOT4L-HXZA

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck