Bunching. It’s not just rolling up your sleeves or chucking bananas, bunching can refer to something that people or businesses can do to get better tax deductions.
Let’s say that, generally, you have a lot of medical bills over time. Big medical bills are something that can qualify you for a deduction, but only when they reach 10% of your income. If you make $50,000 per year that means that $5,000 of medical bills is when it begins to affect your taxes.
If your medical bills don’t reach that level, if in that example, it only looks like you’re going to reach $4,400 of medical bills in the calendar year, you can try to arrange things so that you do in fact reach that threshold. Perhaps you move up a dentist appointment or get another pair of glasses before the end of the year to make up that $600 in the example above. That’s what bunching is.
This year, 2016, is the last tax year that people aged 65 or older can use a special 7.5% threshold for the deduction of medical expenses. If you fall into that category and had some significant medical expenses, you may want to try bunching this year.
A few of the allowable medical expenses that you can itemize are long-term care premiums, prescription drugs, mileage or transportation costs, and home improvements that accommodate a disability or medical condition. Some examples of non-deductible items are nonprescription medications, nutritional supplements, or funeral expenses.