07 Dec 2017 tax planning items in light of proposed new tax laws
By now you probably have heard about the sweeping proposed tax changes coming in 2018. Here are some 2017 tax planning items to consider in light of some proposals from the new tax laws. As no tax law has been finalized, these items may not be necessary.
• Property taxes on residence – Both bills limit the deduction to $10,000. Pay April 2018 payment in December if the annual taxes are over that limit. If in AMT, no benefit.
• State income taxes – Both bills eliminate the deduction. Pay all of the 2017 state income taxes in December. If in AMT, no benefit.
• Medical expenses – House bill eliminates the deduction. If over the 10% AGI limit already, pay in December.
• Miscellaneous 2% itemized deductions – Both bills eliminate employee business expenses and tax related professional fees. The Senate bill also eliminates all other 2% items, including investment expenses. Pay in December if over the 2% AGI limit AND not in AMT. If not over the 2% limit OR if in AMT, no benefit.
• Charitable contributions – Not eliminated or limited. However, with the elimination of the other deductions and the increased standard deduction, some taxpayers will not itemize in the future. If applicable, make 2018 donations in December to get a tax benefit. An above the line deduction might be available in 2018, but no downside for making payments in 2017. Consider donor advised funds or IRA charitable transfers for the future.
• Entertainment facilities and tickets – Eliminated in both bills. Pay for sports tickets that are deductible before the end of December.
• Stock basis on sale or contribution – Proposals include requirement to use FIFO instead of specific shares rules. Consider this with potential sales or gifting in 2017 if applicable.
• Lower tax rates – Both proposals have similar or lower tax rates in 2018, so deferring income or accelerating deductions for taxpayers that will have similar taxable income in both years is a good choice, as it has always been.
Please contact us to discuss if you want to take advantage of any of the above planning items as they might apply to you.