What to do before the end of the year - or - what the new tax bill will mean for you (as far as we know now...)
December 28, 2017
With the President having signed the tax bill, we are going to see big changes in our tax returns. The bill doesn't go into effect until the 2018 tax year, which means that your next tax return will be filed under the old tax laws, and you won't see the effect of the bill on your tax return until you file in early 2019. However, it's not too late to make moves that will be advantageous to you in the next two filing seasons.
One of the most talked-about changes is the limit on state and local taxes as an itemized deduction on Schedule A. These taxes include both income taxes and property taxes, which run high in our State of New York. These will be limited to $10,000. That limit, coupled with the loss of miscellaneous itemized deductions, and the increase in the standard deduction means that many more people will probably take the standard deduction rather than itemizing. For this reason, it's probably a good idea to prepay any property taxes due at the beginning of 2018 before the end of this year.
Since income tax rates are going down, it is also a good idea to prepay any expenses you can this year, and/or defer income into 2018 that you can. This would include making charitable contributions before the end of the year that you might have made in 2018 - again, because the standard deduction will be so much higher in 2018, it may not be possible to take a tax deduction for those contributions in 2018, so take them while you can.
More will be revealed as the details of this massive bill are revealed to the public and analyzed by taxation specialists, but for now, it's safe to say that prepaying state and local taxes, making charitable contributions this year rather than next, and deferring income into 2018 are wise steps to take to reduce your taxes in 2018.