Summary:
Save taxes by planning which year to deduct medical, charitable, interest, property taxes and miscellaneous deductions.

Taxpayers overpaid taxes by $1 billion in 1998 because they took the standard deduction

when they could have itemized. The average overpayment was $438, says the General Accounting Office's latest study.

Bunching itemized deductions. Grab your share of that overpayment plus more by

bunching deductions every other year. Some years the standard deduction is clearly the best choice. Other years it's close. When it is, you're a candidate for bunching. This means sliding itemized deductions to or from one year. You delay paying November and December expenses until the following January, and at the end of that year, you accelerate paying expenses due the following year. Try to have itemized deductions high in every other year by planning.

Most expenses are deductible in the year paid and therefore can be moved. Movable expenses include home mortgage interest and property taxes, charitable donations, some medical expenses and some miscellaneous expenses. Naturally you can't move some items; casualty and theft losses come to mind.

At high income levels, taxpayers must reduce itemized deductions, but most people need not worry about that.

Medical deductions. These are deductible only to the extent they exceed 7.5 percent of adjusted gross income. While you don't control medical emergencies, you can pay other expenses early or late. Also schedule dental and physical checkups in the year you want to itemize.

Medical deductions include payments for you, your spouse, your dependent--even for a child your ex-spouse claims as a dependent.

Miscellaneous itemized deductions. These are deductible only to the extent they exceed 2 percent of adjusted gross income. Included are expenses used to produce or collect income,

expenses to manage income-producing property and unreimbursed employee expenses such as travel, meals, lodging and special clothing. You can move many of these.

Certain employees, however, don't deduct unreimbursed expenses as an itemized deduction; they deduct them from gross income. This group includes home workers, commission drivers, some traveling sales persons and full-time insurance salespersons.

Conclusion. Take control and plan. Save taxes by bunching.

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