The new tax bill passed by Congress is expected to be signed into law by President Trump in the next few days. Based on the changes that will take place as of January 1, 2018, there are several items that taxpayers should consider implementing prior to December 31, 2017.
Please note that each taxpayer’s situation is different and each suggestion below should be discussed with the taxpayer’s tax and financial advisors to determine what steps, if any, should be implemented now or deferred until next year or whether it should be implemented at all depending on the taxpayer’s business and tax attributes.
Items to consider:
- Prepay real estate property taxes if you have amounts due for 2018 (cannot prepay NJ or NY state income taxes)
- Prepay home equity interest (no deduction after this year)
- Make charitable contributions this year, especially if not itemizing deductions in 2018
- Accelerate business deductions
- Medical expense deduction floor reduction to 7.5% only lasts through 12/31/18, so incur medical expenses if possible before then
- Delay or accelerate Roth conversion
- Defer or accelerate income*
- If you are a US person with foreign businesses, potentially converting to an S corporation before year end could be beneficial due to a “deemed repatriation” of profits in the new bill
- If you have children in private elementary, junior high or high schools and have not already been funding 529 plans, consider use of 2017 annual exclusions not otherwise exhausted to fund 529 plans
*Deferral of income until 2018 could save taxes for some taxpayers because of the lower marginal rates, while acceleration of income could save taxes for others due to the limitation on deductions of state and local taxes. Whether or not a taxpayer is subject to AMT also plays a role. Again, each taxpayer should consult his or her own tax and financial advisors for specific advice.