You choose every tax year whether to itemize or claim the standard deduction. With the standard amounts almost doubled by the Tax Cuts and Jobs Act, the trend definitely is toward the standard amount, which for 2020 returns is $12,400 for single filers this year, $18,650 for heads of households, and $24,800 for jointly-filing married couples.
If, however, you find that itemizing will give you a larger deduction, then use that method. And one way to bump up your Schedule A claims is to bunch your tax-deductible expenses. Bunching is simply the consolidation of deductible expenses into one tax year. If you’re near the $10,000 cap on state and local taxes, there’s not much you can do here. If, however, you have room to work, consider paying at least some 2020 property taxes this month in order to get the most out of them.
Medical expenses also face a cap, which remains for this tax year at 7.5 percent of your adjusted gross income (AGI). Any doctor and dental costs that exceed that amount can be claimed on Schedule A. As the tax law now stands, this could be the final year the 7.5 percent cut-off is in place; it’s set to go to 10 percent in 2021. But I suspect Congress will keep it at 7.5 percent when it finally takes up legislation to renew expiring tax breaks.
Your mortgage interest deduction is still allowed. Making your January home loan payment in December can give you some more interest to claim this year.
The same is true for charitable donations, which are still deductible and not limited at all. If you’re close to having more in itemized claims than your standard deduction amounts, think about making 2021’s charitable contributions now. It could be enough to push you over the limit so you don’t lose the value of other itemized claims.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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