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Bunching Your Income Tax Deductions to Maximize Their Impact and Minimize Your Taxes

Written by Nickel - One Comment

Do you want to maximize the value of your income tax deductions? If so, then you might want to consider “bunching” them into years when they’ll have the greatest impact. Depending on your circumstances, there may be years in which you find yourself in a higher income tax bracket, or when you fall just short of being able to itemize your deductions.

If you find yourself facing a higher tax rate in one year than you expect to face during the next, you might want to accelerate some of your deductible expenses from next year into this year for federal income tax brackets. Some ideas for this would include and would guide you to federal income tax:

  • Accelerating your charitable donations
  • Pre-paying deductible business expenses
  • Pre-paying your property taxes

For charitable contributions, you could either make two year’s worth of donations to your preferred charities all at once, or you could use a donor-advised fund to hold the excess contributions, allowing you to take your time when deciding where to direct your contribution.

If you find yourself being able to itemize deductions in some years but not others (or barely making it over the threshold each year) you should consider bunching your deductible expenses into one year and taking the standard deduction the next.

In this case, the same types of strategies apply. Either accelerate or defer expenses such that two (or more) year’s worth of such expenses hit within a single year. That way, you’ll be able to take better advantage of those expenses during years in which you itemize, thereby reducing your overall tax burden.

Published on December 29th, 2010
Modified on January 12th, 2012 - One Comment
Filed under: Taxes

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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One Response to “Bunching Your Income Tax Deductions to Maximize Their Impact and Minimize Your Taxes”

  1. 1
    Pete L Says:

    That’s good advice. I can also see that being useful for those who don’t normally qualify for itemized deductions, but who have something unexpected in a particular year, such as a high medical expense. That would be the year to squeeze other deductible spending into December, if possible.

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