www.qns.com I LIC COURIER I JANUARY 2018 43
TAX TIPS
Now That The Tax
Overhaul Has Passed,
Here Are Five Moves
To Consider
Before Year's End
Add another item to your holiday shopping list: last-minute tax planning.
Congress has passed the most sweeping overhaul of the federal tax code in three decades. e Republican
legislation, which President Trump celebrated on Wednesday, delivers most of its benets to corporations and
the wealthy, but there are key changes that aect individuals.
Unlike the corporate tax cuts, the revisions to the individual code are temporary and expire in 2026. Most of them
kick in on Jan. 1, and there are steps you could take in the coming days to maximize new advantages and
minimize the potential hit from other changes.
Tax advisors are going to be busy the next couple of weeks.
Here are ve things to talk to your advisor about doing before New Year’s Day.
PAY YOUR PROPERTY TAXES EARLY
e legislation sets limits on the amount of state and local taxes that people can deduct. Beginning in 2018,
couples ling jointly will be limited to an annual deduction of no more than $10,000 worth of state and local
income, sales and property taxes.
Right now, there is no limit on the deduction and the change will be a hard hit to many residents of California and
other high-tax states.
Property tax bills generally go out in the fall, with half the taxes due by early December and the other half due by
April. If your state and local taxes will be greater than $10,000, you could pay the second installment bill before
the end of this year and should still be able to deduct it on your 2017 taxes when you le in the spring, if you
itemize.
e legislation doesn’t specically rule out such a move. But it does prohibit people from pre-paying 2018 state
or local income taxes this year and claiming them as an itemized deduction for 2017.
“e bill is pretty clear that you will not be able to prepay, even if you could, your income taxes,” said Darien
Shanske, a tax law expert at the UC Davis School of Law. “But it’s silent about property taxes.”
Pre-paying property taxes might not be possible if your mortgage servicer pays them for you from an escrow
account. People should contact their servicer.
MAKE AN EXTRA MORTGAGE PAYMENT
e tax overhaul will nearly double the standard deductions for taxpayers who don’t itemize, from $6,350 to
$12,000 for individuals, and from $12,700 to $24,000 for couples.
e change is expected to dramatically reduce the number of lers who itemize because fewer people will have
total deductions above the new levels.
Given that, taxpayers who anticipate itemizing on their 2017 returns might want to consider making their
January mortgage payment before the end of the year.
Doing so would allow you to deduct an extra month of mortgage interest that you might not be able to deduct on
your 2018 return if you don’t end up itemizing because of the higher standard deduction, McBride said.
e tax bill also limits the deduction to interest on as much as $750,000 in mortgage debt, down from the current
$1-million limit. People who already own homes still get the higher limit.
But lawmakers added a provision to prevent people from a last-minute scramble to buy homes before the limit
goes into eect next year.
Unlike most of the bill’s changes, which take eect on Jan. 1, a taxpayer must have entered into a binding written
contract before last Friday to be eligible for the $1-million limit.
GIVE MORE TO CHARITY
Charitable contributions are one of the most popular deductions. But the number of people who itemize is
expected to fall sharply. If you think you’ll stop itemizing, you might want to consider making your 2018
contributions by Dec. 31 so you would be able to deduct what you give to charity.
“is might be the year, if they can no longer itemize their charitable donations, to clean out the closet and donate
to Goodwill or the Salvation Army or make that extra contribution to your church,” said Kathy Pickering,
executive director of the Tax Institute at H&R Block, which provides research and analysis to the company’s tax
preparers.
As with an extra mortgage payment, the move makes tax sense only for people who believe they will have enough
deductions to itemize on their 2017 return but not when they le 2018 taxes, said Robert Spielman, a partner at
Marcum, an independent public accounting and advisory services rm.
e key is estimating your chances of having deductions in 2018 that exceed the new standard deduction level.
If you’re not going to exceed that, maybe you arrange with your parish and prepay your 2018 pledge in 2017.
DEFER OR ACCELERATE INCOME
Individual marginal tax rates are shiing lower, so you’ll generally pay less taxes on the same amount of earnings
in 2018 compared with 2017.
People who are self-employed, such as contract workers or freelancers, should consider holding o on sending
invoices so the payments come in 2018.
For most people, their federal tax bracket is going to be lower under the tax bill, so it would make sense to defer.
Depending on the size of your family, however, you might not want to make that move. Instead, it might make
sense to accelerate any possible income into this year when you might owe less taxes.
e tax bill eliminates the existing $4,050 exemption that can be claimed by taxpayers for themselves, their
spouses and their dependents and also reduces taxable income. ose exemptions currently phase out at
upper-income levels.
Some of that change is oset by the legislation’s doubling of the child tax credit to $2,000 and making it applicable
to higher-income households, as well as adding a $500 family tax credit for dependents other than children.
It all means that some people might have more osetting family-related deductions this year.
If you have a big family, three or more kids, it might make sense to accelerate the income into this year before the
tax bill takes eect next year.
TAKE ADVANTAGE OF EXPIRING DEDUCTIONS
Under current law, employees are allowed to deduct unreimbursed business expenses if they total more than 2%
of their adjusted gross income.
ey include a home oce, depreciation on a personal computer required for the job, dues to professional
societies and subscriptions to journals and trade magazines.
All of those deductions would disappear through 2025 under the Republican tax bill, so you probably want to
move as many of those expenses as you can to this year, such as by re-upping professional journal subscriptions.
A key to tax planning is guring out which deductions to take in one year and which to postpone until the next.
is year’s a little dierent because we have a lot of deductions going away.
John Savignano is a partner with Savignano Accountants & Advisors located at 47-46 Vernon
Blvd., Second Floor, in Long Island City. If you have any questions or require additional
information, please call John at 718-707-0955.
