The New US Tax Plan - How should I start thinking about it?
As you may have heard, a tax bill has been produced via the reconciliation process between the House and the Senate. With only 11 business days left in 2017, there are some moves that should be on your radar and that you should be prepared to make IF the tax bill passes.
That brings me to a VERY IMPORTANT point...we still don't know if a tax bill will pass but all indications are that we will have a vote prior to year end. The point of this literary masterpiece (that you are now fully immersed in and can't look away from) is not to debate the merits of the plan but rather to make sure you have thought about items that may affect you and about what moves could benefit you if made prior to December 31, 2017.
That's it...i'm done. Suspenseful, right? Make an appointment and I'll tell you some more.
A few big items for which to prepare said trigger if the bill passes:
1) The proposed bill caps real estate tax and state and local income tax deductions at a combined $10,000 per year starting in 2018. If you are going to lose any of this deduction in future years, you should consider paying your first quarter 2018 real estate taxes now if you are able to do so.
2) A continuation of #1, you can make an estimated state tax payment in 2017. If you wait and make the payment in 2018, assuming you need to make one, you might lose the ability to deduct some or all of the payment depending on how much state tax you pay and how high your real estate taxes are. Remember, if the bill passes, the state and local tax COMBINED with real estate taxes is capped at $10,000.
3) The standard deduction will nearly double for married couples to $24,000 in 2018 if the tax plan passes. If you will not exceed $24,000 in itemized deductions next year but will be itemizing in 2017 and you own a home with a mortgage, you can make your January mortgage payment in December to get the extra interest deduction this year.
There is no shortage of change from our current tax code in the new bill. Contact your CPA to discuss what options you should be ready to take if the bill passes this year. If you prepare ahead for varying circumstances, executing some payments prior to year end will be easier and smoother.
Adam Ditsky, CPA
President, Ditsky Strategic