With the large federal standard deduction most people are no longer itemizing their tax deductions. Itemized deductions include, among a few other things, state taxes paid, mortgage interest, and charitable contributions.
In certain situations it can make sense to “stack” your itemized deductions and utilize the large standard deduction every other year.
Here is a simplified example:
NO STACKING Year 1 Year 2
State Taxes $10,000 $10,000
Mortgage Interest $6,000 $6,000
Charitable Contributions $8,000 $8,000
Total Itemized Deductions $24,000 $24,000
Standard Deduction (MFJ) $25,900 $27,700
YES STACKING Year 1 Year 2
State Taxes $10,000 $10,000
Mortgage Interest $6,000 $6,000
Charitable Contributions $16,000 $0
Total Itemized Deductions $32,000 $16,000
Standard Deduction (MFJ) $25,900 $27,700
In this example, the married filing joint couple would save ~$1,100 in Year 1 and then every other year (Year 3, 5, etc.) if they keep up the same stacking pattern! It takes a bit of work to develop a new rhythm to consistently stack your itemized deductions, but by using a Donor Advised Fund (which comes with other advantages, too!) making this slight tweak to your giving can reduce your income tax bill a bit every other year. For (a lot!) more detail on this stacking strategy check out this article.
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