Individual income taxpayers have a choice. They can claim the itemized deductions (medical, taxes, interest, contributions, other expenses) on form 1040, Schedule A. Or they can choose the “standard deduction” allowed by the tax law. Sometimes the total of Itemized Deductions is just a little more than the standard deduction (or just a little less).
For 2014, the standard deduction for couples filing a joint return is $12,400, plus if one is age 65, an additional $1,200. So if both are mature (age 65 or older) by Dec. 31, their standard deduction is $14,800. That is in addition to the exemption of $3,900 for each person.
In 2014 the standard deduction for a single person is $6,200, plus $1,550 if age 65.
In both cases above, additional amounts are added if a person is blind by IRS rules.
Blindness for tax purposes is documented by a certified statement from a doctor or optometrist that the person cannot see better than 20/200 in the better eye with glasses or contact lenses; or the person’s field of vision is 20 degrees or less.
Years ago a gentleman drove to our office and claimed he was blind for tax purposes. I asked how he was able to drive. He had the narrow field of vision and the required statement explaining his condition. He promised he only drove in the daytime and very little at that, but he just kept turning his head a lot.
Bunching the itemized deductions for property taxes means choosing which year to pay the third and fourth payments. For charitable contributions, it means deciding to pay the December or January contributions in one year or the other. If you have lots of medical expenses already this year, you might get the eye or dental appointment in December so the medical expenses paid in 2014 are enough to save some income taxes.
The main idea is to have enough Itemized Deductions to be a benefit in one year and choose the standard deduction in the other year.
Some folks will pay the January mortgage payment in December to “bunch” up the interest expense. It is good to do priority mail for that payment to prove it was paid in December (mailing is treated as the date paid).
Maybe you could at least do a quick list of your 2014 itemized deductions you have paid so far and decide if it will save taxes to “bunch” up before the year is over.
On the other hand, high income taxpayers may also check the Alternative Minimum Tax, form 6251, to see if that will be owed (no deduction for taxes).
Did you hear? “If you want time to pass quickly, just give your promissory note for 90 days.”
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.