Last Minute Tax Planning for 2017 Under the New 2018 Tax Bill

With Congress giving taxpayers barely a week to react before the end of the year, the new 2018 tax bill does present some unique opportunities to do last second tax planning for 2017. Much of what can be done before year-end is standard tax planning advice. We caution that these are standard planning techniques that taxpayers can do, but may not benefit you in your specific tax situation. Many of these may result in Alternative Minimum Tax. Consult with us before acting upon these suggestions to ensure a benefit. For our full analysis of the 2018 tax bill, follow this link.

  • Make bigger charitable contributions in 2017. This is particularly true if your tax bracket will be lower next year due to the tax law changes, and if you will not itemize your deductions in 2018 because of the larger standard deduction available in 2018.
  • Defer income into 2018. Since tax rates will generally be lower in 2018, deferring income into 2018 makes sense as you will see less tax on that same income next year.
  • If you take advantage of the “miscellaneous itemized deductions” every year, such as investment expenses, tax preparation fees, union dues and unreimbursed employee expenses, try and pay as much as you can in 2017. This deduction will be completely eliminated beginning in 2018. If you do not itemize in 2017, there is no benefit to making this move in 2017.
  • If, by chance, you are moving in the next month or so and your moving expenses would qualify for the moving expense deduction, prepay any expenses you can in 2017. The moving expense deduction is being eliminated beginning in 2018.
  • If you have significant medical expenses, and they will exceed 7.5% of your adjusted gross income in 2017, pay those expenses before year-end. This is particularly true if you may find yourself taking the larger standard deduction and not itemizing your expenses in 2018.
  • Prepay 2018 property taxes in 2017 if your local taxing agency allows prepayments. But note, that if you will pay alternative minimum taxes in 2017, this move will not benefit you since property taxes are a “preference item” and not deductible under the AMT calculation.
  • If possible, pay down home equity loans before the end of 2017. The interest on them will no longer be deductible in 2018.
  • If you have a home equity loan, be sure to pay as much interest as has been charged before year end.
  • If you anticipate owing state taxes for 2017, it may benefit you to pay them before year-end.

 

Steve Trojan, CPA is the owner of Flatiron Advisors Tax and Accounting and manages the Boulder, CO office. He can be reached at 720-598-1020.

Facebook Twitter LinkedIn