2017 Tax Reform Bill: What You Need to Know Now
by David A. Kalicka , CPA, MST
The House and Senate have passed the most comprehensive overhaul of our federal income tax system since 1986 and it is expected the President will soon sign it in to law. The majority of the provisions in this new law are effective in 2018. However, the impact of some of these changes provide tax saving opportunities, that require action on your part before December 31, 2017.
Real estate taxes and state income taxes: Commencing in 2018 the total deduction allowed for these taxes will be $10,000. Therefore, if you are currently paying more than that amount on an annual basis, you should pre pay real estate taxes before the end of this year. In Massachusetts, real estate taxes have been set through June 30, 2018. Therefore, you can pay before December 31, the installments that are traditionally due February 1 and May 1. If you own property in other states, you can also prepay any real estate taxes that have been officially assessed. If you are paying state quarterly estimated income taxes for 2017, you should pay your fourth quarter state estimate prior to December 31, 2017. Unfortunately, if you are in the alternative minimum tax, you will not benefit from pre paying real estate or state income taxes.
Increasing Standard Deduction to $24,000 and elimination and limitation of certain itemized deductions: This change will reduce the number of people that will itemize their deductions. Therefore, if this effects you, you should consider accelerating your charitable contributions in to this year. Although charitable contributions are deductible in 2018, if you don’t have enough deductions to itemize, you will not realize any tax savings from your contributions in 2018. If you make them before December 31, 2017, you will be able to deduct them on this year’s tax return.
Lower tax rates on income in 2018 : Corporations, pass through entities and individual tax rates will be lower in 2018. Therefore, if you have the ability to defer income in to 2018, or accelerate deductions in to 2017, you will have an opportunity to save taxes.
There are several other provisions which will require additional planning, however those provisions will primarily impact future year taxes and therefore don’t require any action until next year.
If you have any questions, please contact your MBK tax adviser.
Best wishes for a Happy Holiday Season and New Year.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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