To Bunch or not to Bunch?

TAX Chat

10.26.15 | TAX Chat

Most moderate or high income taxpayers will not receive a federal tax benefit for their unreimbursed medical expenses. While medical expenses are deductible as an itemized deduction, taxpayers can deduct only the amount in excess of 10% of adjusted gross income (7.5% through 2016 for taxpayers 65 and older, however, for alternative minimum tax purposes, the threshold is 10% for all taxpayers). Often the medical expenses are just short of exceeding the threshold, and therefore, none of the expenses are deductible.

By “bunching” non-urgent medical procedures and other controllable expenses into a single year, you may increase your ability to exceed the applicable floor. Controllable expenses might include prescription drugs, eyeglasses and contact lenses, hearing aids, dental work, and elective surgery.

To the extent possible (without harming yourself or your family’s health), by delaying expenditures from the prior year to the current year and accelerating expenditures from the following year to the current year, you will increase your chance of exceeding the applicable threshold. By bunching expenses every other year, you may convert otherwise nondeductible medical expenses into deductible medical expenses.

Questions about the benefits of bunching?  Please contact us.

Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.