Year-end tax planning for married couples should take into account recent tax law, which has raised the standard deduction to $10,000 in 2005. As a result, you may be better off taking the standard deduction rather than itemizing, if you file a joint return.
Couples filing jointly should plan to take the standard deduction if their itemized deductions are likely to be less than $10,000 in 2005. Those deductions include mortgage interest, state and local taxes, charitable contributions, and medical expenses in excess of 7.5 percent of your income.
If those outlays for 2005 total less than $10,000, don’t rush to pay expenses such as state taxes, mortgage interest, and charitable donations. Defer payments into 2006, if that’s feasible. Next year, the total of your itemized deductions might be great enough to make itemizing worthwhile. By following this strategy in alternate years, you can avoid wasting deductible expenses.