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How to Pay Income Taxes, Part 1 |
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Paying income taxes can be distressing. But for many people, using simple, lawful techniques
can save thousands of tax dollars.
Bunch your itemized deductions for maximum tax savings.
If your itemized deductions usually come close to the standard income tax deduction amount, try what tax advisors call "bunching" your deductions into a single year. For instance, you could make two years of charitable contributions in a single year (actually giving more in one year, and then taking the next year off). This increases that year's allowable deduction. The next year, when you don't contribute to charity and don't have enough expenses to itemize, you'd take the standard deduction. By doing this, you get an extra benefit in the itemizing years and lose little (if anything) in the alternate years.
Bunch miscellaneous deductions to realize a greater tax benefit.
Miscellaneous deductions such as tax preparation costs and employee business expenses only show up as a benefit after they cost you more than 2 percent of your adjusted gross income (AGI). If you can combine those expenses (say, paying for continuing education every other year), you could increase the chance of getting a tax break instead of losing the benefit every year because the first 2 percent |
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