Under the Tax Cuts and Jobs Act (TCJA) of 2017 that was recently passed by the House and Senate, and signed into law by President Trump on December 22, 2017 there are many changes to the deductions and exemptions that will be affecting your tax burden for the tax years 2018 through 2025. Additionally, most Americans are going to find themselves with different tax rates in 2018 than in 2017.
Given that your individual tax rate will likely either increase or decrease in 2018 depending on how your household income matches up with the new tax rates, you should take a moment to discuss with us a projection to determine if you should maximize your deductions in 2017 prior to the new tax rate being applied to you. If it is determined that it is in your best interest to maximize your deductions in 2017, we believe that the most urgent provision that you need to address immediately is regarding the deduction for State and Local income and property taxes (SALT).
Prior to the passage of the TCJA, state and local income and property taxes were fully deductible from your federal tax burden. Starting in 2018, the SALT deduction will be limited to $10,000 annually for any combination of state and local property taxes or state and local income or sales taxes. The TCJA specifically bans taxpayers from prepaying state and local income taxes to increase deductions for 2017, but it doesn’t prohibit prepayment of property taxes.
The standard deduction has also been doubled for tax years 2018 through 2025, so far fewer taxpayers will benefit from itemizing their deductions. Therefore, if you are planning to make charitable donations in 2018, but you find yourself in a situation where you do not need to itemize your deductions, you would see increased tax benefits to making those charitable donations by December 31, 2017 to increase your itemized deductions for 2017.
If you would like us to review with you these and other specific tax savings available to you, please call us right away at 301-951-8700 as Congress has left you very little time to modify your tax planning strategies for 2017 and beyond.