Last-minute tax moves to consider – after Christmas but before New Year 2018!
In less than a week, we'll be ringing in 2018! Here are some potentially smart steps to take right now:
Prepay property taxes
If your municipality or school district will allow it, that is.
"
"Many need to issue an invoice. Some towns are set up to do that, some are not," said
A lot of municipalities won't let you prepay. "If they won't, you can't," said
The
Beginning next year, the newly passed Tax Cuts and Jobs Act suspends or reduces many popular tax deductions in exchange for a larger standard deduction. In 2018, an individual (as opposed to a business) can claim an itemized deduction of only up to
"You will fill the tax bucket however you wish," said Williams. "It can be a combination of state and local income and property taxes."
You can double up in 2017: Pay the last installment of estimated state and local taxes for this year no later than
Starting next year, the law will forbid prepayment for state income taxes, but not for property taxes. So a prepayment on or before
Accelerate/postpone income
Generally speaking, tax rates will be lower in 2018. If you estimate you'll pay lower rates next year, defer income -- salary, bonus, cashed-in life insurance policy -- into 2018. If you think your taxes will be higher next year, then accelerate income this year.
"If you pay estimated taxes, you can pay fourth-quarter estimated taxes this year, and then take the deduction in 2017," Zatz said.
Some possibilities to game the new tax law, and accelerate or defer income:
* Converting a regular IRA to a Roth IRA? Consider where you live and the amount of state tax you'll pay on the income. If you live in
* If you run a business that operates on a cash basis, the income you earn isn't taxed until your clients or patients pay. So hold off on billings until next year -- or until so late in the year that no payment will likely be received this year -- and defer income. Postpone last-minute jobs until 2018, or defer deliveries of merchandise until next year (if doing so won't upset your customers). Postpone your right to payment, and the income from the job or the merchandise, until next year. Keep in mind that the rules in this area are complex and may require a tax professional's input.
* If you cancel out debt, that's considered taxable income. So if you're planning to make a deal with creditors, consider postponing until January, to defer any debt-cancellation income into 2018.
Watch those deductions
* Charitable: The itemized deduction won't be changed. But because most other itemized deductions will be eliminated in exchange for a larger standard deduction (for example,
* Medical. The new tax law boosts itemized deductions for medical expenses. For 2017 and 2018, medical expenses can be claimed as itemized deductions to the extent they exceed 7.5 percent of adjusted gross income. It's retroactive for this year. Child care falls into this category. But keep in mind that next year many individuals will have to claim the standard deduction because many itemized deductions have been eliminated. If you won't be able to itemize deductions in 2018 but will be able to do so this year, consider accelerating "discretionary" medical expenses. For example, before the end of 2017, get new glasses or contacts, or see if you can squeeze in expensive dental work such as an implant.
Business entertainment. For decades, businesses have been able to deduct 50 percent of the cost of entertainment directly related to or associated with the active conduct of a business. For example, if you take a client to a nightclub after a business meeting, you can deduct 50 percent of the cost if strict substantiation requirements are met. But under the new law, for amounts paid or incurred after
Alimony. Under the tax law, new alimony payments aren't deductible by the payer or included in the income of the recipient, generally effective for any divorce decree or separation agreement executed after 2017. So if you're in the middle of a divorce or separation and you'll wind up paying, it would be worth your while to wrap things up before year's end. On the other hand, if you'll wind up on the receiving end, it would be worth your while to wrap things up next year. Existing alimony agreements are grandfathered, Williams said.
Moving. The new law suspends the deduction for moving expenses after 2017 (except for certain members of the armed forces), and also suspends the tax-free reimbursement of employment-related moving expenses. So if you're in the midst of a job-related move, try to pay your deductible moving expenses before 2017's end, or ask your new employer for reimbursement before then.
Unreimbursed employee expenses. Under current law, these are deductible if they exceed 2 percent of adjusted gross income. The new law suspends that deduction for employee business expenses paid after 2017, including legal fees, accounting fees, tax-prep fees, investment advice, safe-deposit boxes, etc. If you're self-employed, the rules stay the same, and you can still deduct all these items.
Now would be a good time to talk to your employer about changing your compensation -- for example, getting your employer to reimburse you for expenses you have been paying yourself up to now, and lowering your salary by an amount that approximates those expenses. In most cases, such reimbursements would not be subject to tax.
529 contributions.
Though no federal deduction will be allowed for 529 contributions, taxpayers should still consider increasing them. They are often deductible for state tax purposes (subject to annual limits), which makes them even more valuable beginning in 2018, when deductions for state taxes are limited.
___
(c)2017 Philly.com
Visit Philly.com at www.philly.com
Distributed by Tribune Content Agency, LLC.
Why the best autism treatment is out of reach for poor Texas families
Raleigh businessman snagged retirees in Ponzi scheme, SEC says
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News