Question

Discuss some tax planning strategies that can maximize the benefit of itemized deductions. You should list at least one strategy for each of the following categories:

Medical Expenses

Charitable Contributions

Interest on Mortgage Indebtedness

Answer 1

Medical Expenses:Taxpayers who incur qualified out-of-pocket medical and/or dental expenses that are not covered by insurance can deduct expenses that exceed 7.5% of their adjusted gross incomes. Stategy-Bundle Medical Expenses to Maximize Itemized Tax Deductions. Bunching your deductions can maximize the value you get out of them, especially in categories where you have to cross a minimum threshold. For example, If you have medical expenses every year that equal 7% of your AGI, you'll never get to itemize those deductions. But, if you can push any of those regular expenses into the following year, you may have more than 10% of your AGI in expenses in one year and in this scenario, a portion of those expenses may become deductible.

Charitable Contributions:Any donation made to a qualified charity is deductible within certain limitations. Stategy-Choose the right organization. In order for your donation to be deductible, it must go to a nonprofit group that is approved by the IRS(Internal revenue service).These Organizations can be charitable, religious or educational organizations, though they can also be everything from your local volunteer fire company to a group for the prevention of cruelty to animals.

Interest on Mortgage Indebtedness:Owners of the house can claim deduction of the interest that they pay on their mortgages and some home-equity debt.Stategy-To maximize the interest expense deduction,one should pay careful attention to both the timing and amount of your outstanding debt. Tax payers who find their interest deduction is being limited, may benefit from a review of their loans to see if it is possible to restructure their debt.   Consideration should also be given to the interest tracing rules.