Make these 5 moves now before new tax law kicks in
Big tax changes are coming your way in 2018, and this is your last chance to lower your tax bill or boost your refund come April.
Here are five moves to consider now to make sure you’re taking advantage of tax breaks that may be changing or disappearing.
(Update: Since publication of this story, the IRS has released guidance related to the prepayment of 2018 state and local property taxes. The agency said people can only deduct prepaid property taxes that have already been assessed; prepayments of anticipated taxes will not be deductible.)
Year-end tax moves may be even more vital this year.
Passage of the GOP tax overhaul will mean big changes for taxpayers in 2018.
About 49 million taxpayers, or 28 percent, itemize their expenses for deductions, according to the Urban-Brookings Tax Policy Center. The tax legislation almost doubles the standard deduction. That change and the disappearance of several key itemized deductions mean it’s likely even fewer taxpayers will itemize.
Under the new legislation, an individual would need total itemized deductions to exceed $12,000, the tax bill’s new standard deduction for individual taxpayers, up from the current $6,350. Married couples would need itemized deductions exceeding the new standard deduction of $24,000, up from a current $12,700.)
For taxpayers taking the standard deduction, “there is some level of simplification,” said Tim Steffen, director of advanced planning at Baird Private Wealth Management. “But the downside is that there are certain things you are not going to be able to do anymore.”
To that end, here are five tax strategies to consider now, for the final days of 2017:
1) Get ahead on tax obligations
The break for state and local taxes is substantially curtailed under the tax legisation. Beginning in 2018, taxpayers can claim a federal deduction of up to $10,000, total, for a combination of state and local income taxes, sales taxes and property taxes.
“For those that live in states with high state income taxes, that’s a big hit,” said Jill Fopiano, CEO of O’Brien Wealth Partners in Boston.
The final version of the tax overhaul specifically prohibits taxpayers from taking a deduction in 2017 for prepayment of 2018 state and local income taxes.
But if you pay quarterly estimated taxes, you can make your fourth-quarter payments by Dec. 31 (instead of the Jan. 16, 2018, deadline) and include those taxes paid as part of your 2017 deductions, said Howard Samuels, a certified public accountant at Samuels & Associates in Florham Park, New Jersey.
You may also be able to prepay your property taxes for 2018. Check with your local property tax collector’s office to see what your municipality will allow. (The IRS released guidance on the issue Wednesday, saying that people can only deduct prepaid state and local property taxes if they were assessed in 2017. Prepayments of anticipated property taxes will not be deductible.)
“Some counties and municipalities will accept those tax payments earlier and others won’t,” said Tax Foundation economist Nicole Kaeding.
2) Boost charitable donations
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