Year-end tax planning for married couples may be affected by the 2003 tax law, which raised the standard deduction to $9,500 this year from $7,850 in 2002. As a result, many couples will be better off taking the standard deduction rather than itemizing. (Couples filing jointly should take the standard deduction if their itemized deductions are less than $9,500 in 2003.)
If you’re in that category, you should reverse the standard year-end strategy of accelerating deductible expenses into the current year. Instead, defer paying expenses such as state taxes, mortgage interest, and charitable donations into 2004. Next year, the total of your itemized deductions might be great enough to make itemizing worthwhile.
Following this strategy in alternate years can keep you from wasting deductible expenses. Similarly, if your tax pro says that you’ll owe the alternative minimum tax (AMT) this year, you should not prepay state taxes or investment expenses at year-end, because you’ll waste otherwise deductible outlays.
