When in the midst of tax planning for this season, be sure to do your homework on some money-saving solutions, like Tax Deduction Clustering. After finding the bracket you are in, you may be able to do some deduction clustering. Using this strategy, you take the standard income-tax deductions one year but cluster your itemized deductions the following year (CNBC).
Knowing what you’re eligible for is very important to determine whether or not deduction clustering is even worth your time.
$12,400 is the federal standard deduction for individuals and married couples filing separately; $24800 for married couples filing jointly.
If you have deductions that don’t rise to $12,400 this year, you could wait until next year and cluster them together if it will reach above $12,400. This could be in the form of early payments on state income or property taxes, early payment of mortgage interests, and my personal favorite, charitable contributions.
As a part of their planned giving program, charitable organizations can increase donations by informing donors of this tax savings and wealth management strategy.
By combining annual donations to charity that will reach above the standard $12,400, you could save several thousand dollars in deductions. Deduction clustering is another beneficial way to save while giving back this tax season. To learn more about your personal financial planning options, contact Graeme Woods CLU®, ChFC® today at (570) 661-1066.
Don’t forget to ask about donor-advised funds offered through our investment management vendors.
Written By: Cady Ruth Stoever, G.S. Woods Financial Solutions LLC, Marketing and Communications Associate