Multi-Year Tax Planning: Many people overlook the value of spreading income and expenses over multiple years when doing tax planning.  The tax code has been written to limit certain deductions as compared to income, or phase out certain deductions depending on what your income level is in one calendar year.

So, if you can move two year’s worth of medical deductions into one year, then you may actually get some benefit from the deduction.  Medical deductions are one of those deductions where the benefit you receive is (1) based on your income and (2) how much you have to claim in medical deductions.  The lower your income and the higher the medical expenses you can claim in one year, the better your chances of receiving a deduction in that year.  EXAMPLE: if one family member needs a basic outpatient surgery, and one of the kids needs braces next year, then wait and perform both in the same calendar year to enhance your chances of taking some of the deduction.  EXAMPLE: if your child starts college next year, and the first tuition payment is due in January, pay that tuition in December to take a deduction or credit on your taxes in this year, as well as a deduction or credit in the next year for the subsequent semester payments you’ll have to make in the Summer and/or Fall.

Controlling Income: Pushing two year’s worth of expenses into one year really becomes helpful when you can also control the income you show on your tax return.  If you are self employed, and have some means by which you can control how and when you are paid then possibly you can actually defer income to the next year.  Do this while at the same time lumping two year’s worth of medical deductions into the year with the lower amount of income.

Your deductions can really soar when you play these games, and stick it to the tax code.  Amen.

Thanks, Jason M. Blumer, CPA

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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