The “Tax Cuts and Jobs Act” was approved by Congress on Wednesday, December 20, 2017. President Trump is expected to sign the landmark bill into law shortly.
There are many provisions and changes you need to know in regard to the incoming tax law, see for example http://money.cnn.com/2017/12/20/news/economy/republican-tax-reform-everything-you-need-to-know/index.html. In the interests of time, however, I recommend you review the following suggestions for 2017 year-end (by December 31, 2017) and consult your tax professional.
It is important to note that high-income, blue state taxpayers (i.e. residents of New York, California, Connecticut, New Jersey, Washington D.C., Minnesota, Oregon, Massachusetts, Vermont, and Maryland) that claim the highest in state and local tax ("SALT") deductions appear to be among the tax bill's biggest losers and should pay particular attention to the following.
Call your Tax Professional to inquire about 2017 year-end planning strategies you should undertake (prior to December 31, 2017).
- Specifically inquire whether you itemize deductions and whether you will be subject to the alternative minimum tax this year and next. Under the new tax bill beginning in 2018, tax payers who itemize can deduct a maximum of $10,000 in all state and local taxes ("SALT") combined. However, many tax payers who itemize deductions in 2017 will no longer do so in 2018 because of this and other changes. (Under the new tax bill the standard deduction will be $24,000 for married couples and $12,000 for singles.)
- If you expect to itemize deductions this year and next year, you may want to consider prepaying state and local income and property taxes this year (by December 31, 2017), assuming you preserve $10,000 in local and state deductions for next year. If you expect to be covered by AMT this year, then there may be no reason to prepay state and income or property taxes by December 31, 2017, because they are not deductible under AMT. But keep in mind that if you are paying the real estate taxes through escrow with your mortgage lender, then you will also need to consult the mortgage lender on how to proceed.
- If you are making quarterly estimated state income tax payments you may want to consider making the fourth quarter payment by December 31, 2017 (in lieu of January 16, 2018). Cash basis tax payers can only deduct payments in the year that the payments were made.
- Do note that people cannot prepay their 2018 state income taxes this year and deduct them on their 2017 federal returns.
Please do note that the above suggestions are general in nature and only relate to a few provisions in the new tax bill. Individual taxpayers should consult their professional tax and/or legal professionals for advice and guidance.
The information contained herein has been compiled from sources deemed reliable as of December 21, 2017, but is subject to legislative changes and is not intended to be tax and/or legal advice. This material is furnished “as is” without warranty of any kind. Its accuracy and completeness are not guaranteed and all warranties, expressed or implied, are hereby excluded. Please consult your tax and/or legal professional for advice and guidance.
Information and specific excerpts in this online post have been acquired from various outside/independent sources including:
1. 34 things you need to know about the incoming tax law. http://money.cnn.com/2017/12/20/news/economy/republican-tax-reform-everything-you-need-to-know/index.html
2. Should you prepay your state income and property taxes?https://www.sfchronicle.com/business/networth/article/Should-you-prepay-your-state-income-and-property-12448762.php?utm_campaign=email-premium&utm_source=CMS%20Sharing%20Button&utm_medium=social