New Tax Law and Potential 2017 Action Steps
As if the holidays didn’t have enough details to stress us out, we are now facing new tax laws. Most of you don’t have time to read the 500+ pages of the new law, so allow us to help put the information into bite size pieces for you.
Since we do know that 2018 tax rates will be lower than 2017 tax rates, utilizing more expenses or deductions in 2017 and/or deferring income to 2018 will help you save tax. Also, the new law almost doubles the standard deduction so less people will itemize in 2018 and beyond.
Because of these factors, here are some strategies that taxpayers may want to take advantage of before the year is over:
Property Tax Payments – In order to ensure that you are able to receive the full deduction for your 2017 property taxes, make certain to pay them before 12/31/17. They can be included on the 2017 itemized deductions as long as they are postmarked by 12/31/17.
Charitable Donations – With the standard deduction being raised to such a large amount, there may be a chance that you lose your charitable deductions in 2018. Be sure to donate all that you had planned in 2017, to ensure you receive the full deduction.
Estimated State Payments or Anticipated State Tax Due – If you normally make your 4th quarter Estimated State Tax Payment in January, and cash flow enables, you may want to consider making the payment by 12/31/17 to receive full credit. This deduction is limited in 2018. Likewise, if you anticipate a tax due for the 2017 tax year and cash flow allows, have your tax payment postmarked by 12/31/17 in order to receive full credit. The tax deduction is also limited in 2018.
Business Expenses – The Entertainment deduction is completely repealed in 2018. This means that if you have planned for entertainment in 2018 for your business, and cash flow allows, you may want to pre-pay those entertainment expenses and include them on your 2017 Business return; otherwise you will receive no deduction for the expense in 2018.
This is a small snippet of items that are affected by the new tax law. However, these affect a large majority of people and require some thought about the future.
DP Financial & Tax, Inc.