As you may be aware, tax reform legislation has passed in Congress and was signed into law last week. The new changes are widespread and result in lower tax rates both for corporations and individuals beginning in 2018. Deferring income and accelerating deductions are common year-end tax planning strategies, but in this last week of 2017, the potential for tax savings is greater than ever.
In keeping with the strategy of accelerating deductions, you may want to consider prepaying your 2018 real estate and personal property taxes. A number of localities are accepting prepayments now for 2018 taxes. Since the deduction for state and local taxes will be capped at $10,000 beginning in 2018, by paying now you may be able to claim a deduction for taxes that would not otherwise be allowed. It may also be advisable to ensure that your 2017 state income tax bill is paid in its entirety no later than December 31, 2017. However, if you are subject to AMT, you may not get the full benefit of this deduction even in 2017.
Accelerating charitable donations into 2017 is another strategy worth considering for those who are charitably inclined. With the larger standard deduction amounts that will apply after 2017, some taxpayers may benefit by “bunching” charitable contributions into a single year when itemizing and then claiming the standard deduction in other years.
The full CCH Tax Briefing on the Tax Cuts and Jobs Act is available here. If you wish to speak with a member of our team about how tax reform will impact you, please do not hesitate to contact us.