Many expenses that may qualify as miscellaneous itemized deductions are deductible only to the extent they exceed, in aggregate, 2 percent of your adjusted gross income (AGI). Bunching these expenses into a single year may allow you to exceed this “floor.” So now is a good time to add up your potential deductions to date to see if bunching is a smart strategy for you this year.
Bunching into 2016
If your miscellaneous itemized deductions are getting close to — or they already exceed — the 2 percent floor, consider incurring and paying additional expenses by Dec. 31, such as:
Deductible investment expenses, including advisory fees, custodial fees and publications
Professional fees, such as tax planning and preparation, accounting and certain legal fees
Unreimbursed employee business expenses, including vehicle costs, travel, and allowable meals and entertainment
Proceed With Caution
These expenses aren’t deductible for alternative minimum tax (AMT) purposes. So don’t bunch them into 2016 if you might be subject to the AMT this year.
Also, if your AGI exceeds the applicable threshold, certain deductions — including miscellaneous itemized deductions — are reduced by 3 percent of the AGI amount that exceeds the threshold (not to exceed 80 percent of otherwise allowable deductions). For 2016, the thresholds are $259,400 (single), $285,350 (head of household), $311,300 (married filing jointly) and $155,650 (married filing separately).