Posted By: Dr. Frugal in Taxes on 08/04/2007 at 18:23:29
You can save money by taking advantage of a few tax-saving strategies and make sure you take all the deductions you're entitled to. Bunching and accelerating deductions are two time-honored approaches to cutting taxes. Both require an awareness of what your tax situation is before the end of the year. If you're close to being able to itemize, bunching your deductions may put you over the threshold. Bunching is a strategy that involves timing your payments of deductible expenses by pushing as many deductions as possible into one year. When you bunch, you fatten up your deductions for one year and slim them down the next year, or vice versa. If you're close to having enough medical expenses to meet the 7.5% of income requirement, and there's a medical procedure you're considering, having it done before year's end could put you over the limit and reduce your taxes.
Accelerating deductions is similar to bunching, but you increase your deductions in the current year by paying tax-deductible bills that aren't actually due until the following year. For example, pay your property taxes before the end of the year instead of waiting until they're due in the following year, to push the deductions into the year you'll be able to take advantage of them.
Most people have too much tax withheld from their paychecks and get a refund at the end of the year. The IRS refunded over $150b to taxpayers last year, averaging $1,650 a person.
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