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New Tax Deduction Strategy

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.


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.

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).

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.