That was the question on my latest TurboTax guest post, Should You Take the Standard or Itemized Deduction?
There’s quite a list of things can can be accumulated for itemizing, but remember, the standard deduction is $5,700 if single or $11,400 married, so many don’t exceed these numbers. But, here, I’d like to offer a different spin to those who just miss by a bit. The concept is to bunch your deduction in a way that will put you over the standard deduction every other year. Say your deductions (assuming married) add to $10,000 and you are just missing being able to itemize.
There are three items that you can shift a bit, First, your mortgage payment. In odd years (we’re going to try to make the odd year the one where we itemize, got that?) make the next January payment in December, then in the next year, the even one, be sure not to do this. If your interest is averaging $500 per month, you’ve managed to shift an extra $500 into the itemizing year. Next, the property tax bill. It’s usually not calendar, ours is July-June. So in odd years we can just make the Q1 payment from the next year a month or so early. While the median annual property tax is barely $2000, this strategy will still help you add another $500 to the odd year. If you aren’t afraid of being a bit late, paying the 4th quarter payment on Jan 2nd will help more. You may have a small late fee, ours is 1.5% per month, but if it makes this deductible, it may be worth it. (Careful, if you have a mortgage, the bank won’t like to see a late tax payment, just stick with the pay early.)
Last, and easiest to manipulate is the charitable deductions. For the generous among us, you can put some money in your pocket and keep up your kind philanthropy. Just keep 100% of your donations in the odd years. If you are donating $4000 per year, this strategy would have you make the same $4000 donation in both January and December of the odd year. Now, instead of just $10,000 in the odd year, you have $15,000 in itemized deductions. $3600 over the current standard deduction and a resulting tax savings of $900 if you are in the 25% bracket. Even the $540 you’ll save if 15% is still worth this slight effort. Really, it’s no effort, just a bit of change to the dates you’ll write these checks.
Joe
I don’t know what I’d do without the mortgage interest deduction. I hear there are attempts to phase it out to simplify the tax code.
I understand your issue, but I also imagine something else will help replace it, so your total tax bill may not change too dramatically by losing it.