If you are used to itemizing your tax deductions each spring, things may be changing for when you go to file your 2018 taxes. In fact, according to the nonpartisan Tax Policy Center, over 65% of people who itemized their deductions in 2017 will file for the standard in 2018.
That’s because the 2017 tax reform made some major changes to the individual tax code, including nearly doubling the standard deduction and capping state and local tax deductions to $10,000. But all of this doesn’t necessarily mean you can’t get a benefit for itemizing, it’s just going to take more planning.
In order to maximize the value of your deductions, we suggest bunching them every couple of years and taking advantage of the higher standard deduction in the off years.
What does bunching your deductions mean, you ask? Simply put, it means making as many of your deductible payments as you can every other year to give get the maximum itemized deduction.
That could include making your major charitable contributions a few years at a time, prepaying all or a portion of income and property tax payments up to $10,000 and scheduling medical appointments or procedures in one year in order to have your deductions above the standard $12,000 for single filers and $24,000 for married couples, filing jointly.
This strategy could help you to save thousands of dollars a year on taxes, which will only continue to add up over time.
For more information on maximizing your deductions and creating a tax-smart retirement income plan, check out our guidebook, 5 Smart Tactics for a Low-Tax Retirement.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Wealth Enhancement Group, Wealth Enhancement Advisor Services, LLC., nor LPL Financial, provide tax advice.
Wealth Enhancement Group is a Greater Minneapolis-based independent wealth management firm offering comprehensive and customized financial planning and investment management services. Established in 1997, Wealth Enhancement Group uses a team approach with a focus on simplifying their clients’ financial lives and has offices nationwide.