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How to Reduce Taxes by Itemizing

When you itemize your deductions, you want to take as many as possible. A common deduction problem you can run into is when your costs fall short of the income threshold necessary in a given deduction category.

list of itemized deductions

With several months left to plan your tax strategy for the remaining year, you can plot out your deductions now to pay fewer taxes for 2015. Bankrate shares how to turn questionable expenses into fully deductible expenses.

“Deduction thresholds

“The IRS allows some deductions only after they exceed a minimum amount tied to your adjusted gross income.

“Medical expenses, for example, are of no use for most filers until they total more than 10% of your adjusted gross income. The 7.5% threshold remains for taxpayers age 65 or older, but only through the 2016 tax year.

“Similarly, miscellaneous deductions, such as unreimbursed employee expenses, must surpass 2%.

“If your adjusted gross income is $50,000 and you’re younger than 65, these limits mean your medical costs must be more than $5,000 and your miscellaneous expenses have to exceed $1,000 before you get any Schedule A deductions in these categories.

“Pay attention to these costs throughout the year. If you find you’re getting close to the limits, think about bunching as many deductible costs as you can into this tax year.

“In the example above, if your medical costs are at $4,750, get to your optometrist’s office by Dec. 31 for that second pair of reading glasses you’ve been meaning to buy. If your out-of-pocket expenses for the eye exam and new glasses exceed $250, you’ll be able to claim the excess as a medical deduction on your next tax return.

“Many deduction options

“For miscellaneous expenses, think about prepaying any business magazine subscriptions or professional dues early to help you over the 2% mark.

“If you looked for a new job this year, be sure to count your job-hunting expenses here, too. Just remember that your job search has to be in the same field in which you’re already employed.

“Do you have a hobby that nets you a bit of extra spending money throughout the year? Any costs you had toward that hobby can be totaled up as a miscellaneous expense. But you can’t deduct more than you made on the hobby.

“Write off your taxes, too

“And if this whole deduction process is just too taxing for you and you pay a professional to figure it out, here’s a final itemizing gift from the IRS: Fees paid to tax preparers are also deductible as a miscellaneous expense that can further cut your tax bill.

“There are, however, a couple of downsides to this tax strategy.

“Some items you might bunch into one tax year could cost you if you end up facing the alternative minimum tax. Some prepaid items, such as property and state income taxes, aren’t deductible under AMT rules.”