It may be time to adjust your strategy.When you prepared your federal tax return for 2018, you likely noticed some changes that had an effect on your overall tax liability.
While we had prepared for the changes to rules regarding charitable donations and medical deductions, many of my clients were still surprised at how different their tax return was, and have asked what to do going forward.
Something that my clients, as well as many others, will likely benefit from is the strategy of "bunching" deductions. Your taxes are counted by calendar year, even if the reality is that they are 364 days apart.
A new way, which may make more sense for you, is to "bunch" your donations within calendar years. For example, for places you make annual donations, make your donation in January 2020 and then again in December 2020, only 11 months apart. Then make your next donation 13 months later in January 2022, and again in December 2022 (11 months later).
It is difficult to predict major medical needs, so those are harder to strategize. With charitable donations, however, it is easy! Under the previous rules, making a larger annual donation each December to your favorite charity was usually the best strategy, or smaller ones throughout the year.
This keeps your donations spread reasonably apart, ensuring level cash flow for you and for your receipient. If you successfully do this with all of your donations, even the smaller ones, you will much more likely to utilize the new, higher deduction levels.