'Twas the week before Christmas, and all through the House, not to mention the Senate, legislators were busy passing a new tax bill. We at Down South Accounting & Tax have stepped away from hanging our stockings with care to see what this means for our clients.
The tax bill does not really affect your 2017 return (the one you'll be filing by April). However, because of the ways the new law will impact your 2018 return, there are a few things that might need your attention now.
It has been widely reported that personal exemptions are going away (true) and the standard deduction is doubling (not quite). Because the standard deduction is going up ($12,000 Single/$24,ooo Married Filing Joint), 2017 will be the last time many taxpayers will benefit from itemizing. If you fall into this category, you may want to consider doing these things before December 31 so they can be included on your 2017 return:
* Make your January mortgage payment in December to get an additional month of
interest.
* Pay all 2017 property taxes before year-end, even if your municipality has a January
deadline.
* Make planned charitable gifts now. Pay your January tithe early and get your
donations to qualifying thrift stores next week.
* If you have a state estimated tax payment due on January 15, pay it now.
The new bill caps state and local taxes that can be deducted at $10,000. This is a combined total for all income (or sales) and property taxes. The bill prohibits prepaying 2018 taxes to get a deduction this year.
As of 2018, home equity loan interest will no longer be deductible. The old strategy of using a home equity loan to finance large purchases because the interest was tax deductible is no longer valid.
Other itemized deductions being eliminated include those in the miscellaneous category that were limited by 2% of the taxpayer's Adjusted Gross Income. This includes things like investment fees and unreimbursed job expenses. If you itemize and you'll soon need to pay professional dues, renew a subscription to a professional journal, or pay for advice from a financial advisor, consider spending the money in 2017 to get the possible deduction.
Moving expenses will no longer be deductible in 2018. If you happen to be in the midst of a job-related move, get as many expenses paid before year-end as possible.
The Affordable Care Act's "Individual Mandate" goes away in 2019. However, as it stands now, if you do not have insurance in 2018 you will still face a penalty.
Taxpayers will soon see new withholding rates, and those with children under 17 who will benefit from a higher child tax credit may want to reduce their withholding even more.
Articles like this can offer general advice, but everyone's tax return is unique so it is important to talk with your tax professional to determine which actions are right for you. Take care of tax issues now, then relax and settle down for a long winter's nap!
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