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Bunching your expenses to make tax itemizing worthwhile

November 9, 2021

Schedule 1 Form 1040 SALT limit highlighted

Democrats still are looking to ease the limit on the federal tax deduction on state and local taxes, or SALT as the tax world, and now every affected state and local taxpayer, refers to it.

The latest proposal is to raise the $10,000 cap imposed by the Tax Cuts and Jobs Act of 2017 to $80,000 through 2020, then revert to $10,000 in 2031. Yeah, budget machinations at work.

Surpassing standard amounts: That’s got some folks looking at whether it would be worth itemizing again. To opt for detailing deductions on Schedule A, you’ll need to come up with enough Internal Revenue Service allowable deductions to exceed your standard deduction amounts.

For 2021 taxes, those standard deduction amounts are $12,550 for single taxpayers; $18,800 for heads of household; and $25,100 for married couples filing jointly. The standard deduction is even higher if you’re 65 or older. If you’re single, you can add another $1,700 to the standard amount; it’s $1,350 for each married jointly filing spouse who’s celebrated that birthday.

Being able to claim more than $10,000 in SALT amounts definitely could help you top your standard amount if you live in a high income or property tax state or county. But if it just gets you close, then you’ll need to maximize your other allowable itemized deductions.

You can do that using a process known as bunching.

Timing your tax-break expenses: That’s bunching, folks, not Bündchen, as in supermodel and NFL wife Gisele Bündchen (catching a pass below from quarterback hubby Tom Brady), although this post does explore ways to make your deductions a model of tax-filing effectiveness.

Tom Brady tossing football to wife Gisele Bundchen_Instagram

Bunching is what its name sounds like. You want to gather enough allowable expenses so that they total enough to exceed your standard amount.

Essentially, you bunch them into one tax year.

For example, instead of giving to your favorite charities every year, double up in one year when you’re close to making itemizing worthwhile.

Exceeding thresholds: You’ll also want to pay attention to your Schedule A medical claims. This deduction requires you have enough allowable health care costs to exceed 7.5 percent of your adjusted gross income (AGI).

This means that if your AGI is $50,000 you must have medical write-offs of more than $3,750.

Also, note the word “exceed.” If you just hit $3,750 in medical deductions, you won’t get any itemized tax benefit. And even going over that means that you can claim only the amount in excess of $3,750. So medical expenses of $3,800 on Schedule A will get you a not-whopping $50 claim.

That’s why you need to make sure you don’t miss any deductible medical expenses. This post, 10 overlooked medical expenses that could make it worth itemizing tax deductions, offers some ideas of health care items you might be able to itemize.

Also add the cost of COVID-19 home tests to the medical write-off list. After that 10-list post, the IRS announced that home testing for the coronavirus is an eligible medical expense.

Look at medical timing, too. While you have no control over when accidents that require major medical treatments occur, you can schedule other allowable expenses, such as that arthroscopic surgery that your orthopedist has been recommending to ease pain in your creaky knee.

Push or pull: While my recent suggestions have been to pull expenses into this tax year, bunching works when you push, too.

If you have control over an expense that would go to waste in one tax year, push it into the next one.

This process typically means that you alternate years of claiming the standard deduction and itemizing.

Yes, you can do that. You’re not locked into an irrevocable deduction election. You can — and should — choose the method every tax filing season that gives you the best tax result

And if that’s itemizing for the upcoming one, you need to start bunching allowable expenses now. Or as soon as Congress sings off on and President Joe Biden signs into law any change in the SALT deduction cap.

You also might find these items of interest:

 

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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