ARM Mid-Year Tax Planning Series (2 of 4): Make the Standard Deduction Work for You
Make the Standard Deduction Work for You
The tax rules allow you a deduction equal to the greater of your itemized deductions or a flat amount known as the standard deduction. Thus, itemized deductions only lower your taxable income to the extent they exceed the standard deduction. For 2016, the standard deduction is $12,600 for married taxpayers filing joint returns. If you are single, the amount is $6,300 (unless you qualify as head of household, in which case it’s $9,300). If you’re at least 65, you receive an additional standard deduction of $1,250 if you’re married (plus another $1,250 if your spouse is also 65 or older) or an additional $1,550 if you’re single. In 2017, these amounts will all likely be slightly higher after adjustment for inflation.
If your total itemized deductions are normally close to whichever standard deduction applies to you, you may be able to leverage the benefit of your deductions by bunching them in every other year. This allows you to time your itemized deductions so that they are high in one year and low in the next. You claim actual expenses in the year they are bunched and take the standard deduction in the intervening years. (Deductions you may be able to shift between years include charitable contributions and your state and local income and property taxes. However, watch out for AMT, as these taxes aren’t deductible for AMT purposes.)