Not able to itemize every year? Think about bunching deductions in the years you can itemize.
If you have qualified itemized deductions that are NOT equal to the standard deduction in one year, you might be better off pushing deductions to the next year and itemizing every other year.
For example, if you have significant unreimbursed medical expenses for 2023, it may make sense to accelerate out-of-pockets costs for planned elective procedures or medical equipment into this year to bring you over the standard deduction amount. Keep in mind, you can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). So, if your AGI is $50,000, the first $3,750 of qualified expenses (7.5% of $50,000) don’t count.
Bunching charitable deductions can be a tax-smart way to help accomplish your philanthropic goals.
One way to achieve this is through the use of donor-advised funds which are established with qualified public charities. As the donor, you transfer money, or appreciated stock, to the fund and receive a deduction in the year the charitable donation is made.
For example, if you plan to give $3,000 per year to charity over the next five years, but that annual amount is not enough for you to itemize and take a deduction for your charitable gifts, you could donate the full $15,000 (5 X $3,000) in 2023. That would enable you to itemize this year’s tax return and take the standard deduction in the remaining years (2024 through 2027). The contributions within your donor-advised fund could still be disbursed to the charity on an annual basis, over the five-year period. However, it’s important to understand that contributions to donor-advised funds are irrevocable.