For 2002, the

standard deduction is $4,700 for single filers, $7,850 for married filing

jointly, and $6,900 for heads of household. If you're over age 65 at the

end of the tax year or legally blind, you're entitled to an additional

standard deduction ranging between $900 and $1,150, depending on your

filing status.

It's important

to understand which expenses you can itemize. Some of the more common

deductible expenses include:

Home mortgage

interest expense on up to $1 million in home acquisition debt and $100,000

in home equity debt.

State and local

income and property taxes.

Charitable

contributions to qualified organizations. Gifts of $250 or more require

a statement from the charitable organization showing the amount contributed

and whether you received any goods or services in return. Keep in mind

that a canceled check is not sufficient proof.

Medical expenses

exceeding 7.5 percent of your adjusted gross income (AGI). Examples of

deductible medical expenses include fees for doctors, dentists, chiropractors;

insurance premiums for medical and dental insurance; prescription medications;

hospital care; X-ray and laboratory services; and other related costs.

Miscellaneous

expenses exceeding two percent of your AGI. This category includes unreimbursed

employee business expenses, investment expenses, and tax preparation fees,

among others.

Casualty and

theft losses are deductible in the year the loss took place. Uninsured

losses caused by theft, vandalism, fire, storm, or similar causes are

deductible only if you itemize and only to the extent they exceed 10 percent

of your AGI. The first $100 in losses for each event is nondeductible.

If you tallied

all qualified expenses and came up short for 2002, don't assume you can't

itemize in future years. Consider the strategy of alternating between

taking the standard deduction one year and "bunching" deductible

expenses into the year you itemize.

Bunching refers

to the process of timing your expenses so that they are higher in one

year and lower the following.

The easiest

deductions to juggle between tax years are charitable contributions, state

and local income and property taxes, and your January home mortgage payment.

For example,

you could double up on your charitable contributions and make them every

other year rather than annually. In the year you decide to itemize, you

can make your January mortgage payment in December to boost your mortgage

interest expense. You should also try bunching deductions subject to AGI-based

limits like medical and dental expenses and miscellaneous itemized deductions.

Timing elective medical procedures, such as braces and laser eye surgery,

is a common way to qualify for the deduction.

Be aware that

if your AGI exceeds certain amounts, your total allowable itemized deductions

may be reduced.

For 2002, itemized

deductions decrease by three percent of the amount your AGI exceeds $137,300

for single and joint taxpayers ($68,650 for married filing separately).

This reduction

cannot exceed 80 percent of total itemized deductions and excludes deductions

for medical expenses, casualty and theft losses, and investment interest

expenses.

What if you

discover you could have saved money by itemizing? If you are willing to

recalculate your taxes, you can file an amended return.

Form 1040X

will let you negate your original standard deduction and, in its place,

list all the money-saving deductions you should have taken. Just be sure

you still have the paperwork and receipts to substantiate your deductions

in the event of an audit. Generally, tax returns must be amended within

three years of the original filing deadline. A CPA can help you correct

your past returns and provide you with additional strategies for timing

your deductions to maximize your tax savings.

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