As the tax year draws to a close, many of you are thinking of ways to reduce your taxable income. Generally, this is accomplished by increasing your expenses for the year. For example, making a charitable contribution by check on December 31, 2017, will create a deduction on your 2017 tax return if you are able to itemize deductions.
Another strategy is to “bunch” your deductions. Miscellaneous itemized deductions and medical expenses are limited to a percentage of your adjusted gross income. If it’s feasible to pay some of these expenses before year-end, it may be enough to push you over the limit. If you know you will need new glasses or contact lenses, buy them before the end of the year. If you can, pay all medical and dental bills by December 31. Once, totaled, you may have enough to exceed the 10% adjusted gross income limitation.
Employees can also take advantage of the bunching strategy to exceed the 2% adjusted gross income limit on miscellaneous itemized deductions. This can be accomplished by extending subscriptions to professional journals, paying union or professional dues, and enrolling in and paying tuition for job-related education, all before the end of the year. If you have any questions, please give our office a call.