Some taxpayers who itemize their deductions on Schedule A may do well to "double itemize" or "bunch up" their deductions. Essentially, the taxpayer will maximize their itemized deductions in one year and minimize their deductions in the following year. For example, to double itemize for the year 2001, some bills received near the end of 2000 are not paid until the year 2001 begins. Other expenses, that might not have been paid until 2002 are pre-paid in 2001. This process continues to generate large deductions in odd numbered years. The result? In the odd numbered years, the taxpayer may have almost double the itemized deductions, while the even numbered years produce almost no useful deductions.

On the surface, this strategy seems to generate no net tax benefit since the combined deductions for the various years seem to remain the same in total. This is not the case! Since the even numbered years produce little if any itemized deductions, the taxpayer is entitled to substitute the "standard deduction" for those years. The standard deduction does not require the taxpayer to have actually spent any money on itemized deductions nor does the taxpayer need to produce receipts to justify the standard deduction. The federal government simply allows the taxpayer to use the standard deduction.

How much is the standard deduction? The amount varies depending upon your filing status, earned income level, the tax year, and other factors. For many married couples filing jointly in the year 2001, the standard deduction is expected to exceed $7,300. That means that some taxpayers could use the double itemizing technique to generate over $7,300 in additional deductions every other year. If the couple is in a 28% tax bracket, that could mean over $2,000 in federal tax savings every other year!

Double itemizing often works best for taxpayers who do not have a home mortgage payment. Please feel free to contact me to see if double itemizing is right for you. Remember, you may have to take steps before the year end to take maximum advantage of this technique.