By now, we have all heard about the new tax bill that has been passed and signed into law by President Trump. There are numerous changes that are highly likely to affect you, your estate plan, and especially those of you who own businesses.
We have prepared a detailed presentation for what to do in 2018 and beyond: on Wednesday, January 31st at 1:00 p.m., Bill Conway will lead a seminar on key changes in the tax law and how these may affect you. Please register online now or call our office to sign up. In addition, we will offer one-on-one consults and continue to post updates.
In the short time that remains in 2017, you may want to consider taking some of the steps below. As always, please contact us to ensure that the actions you take are in your best interest based on your unique circumstances.
1. Prepay Property Taxes
The tax bill includes severe limitations on the deductibility of state, local, and property taxes: a combined total of $10,000 in 2018. As such, you may want to prepay your 2018 real estate taxes before the end of this year. First, consider calling your tax preparer to see if early payment could subject you to the alternative minimum tax (ATM) in 2017. Next, consider calling your specific jurisdiction. While several jurisdictions have announced that they will accept prepayment of 2018 property taxes, the IRS announced yesterday that homeowners may only deduct prepaid property taxes in their 2017 tax return if those property taxes were both assessed and paid during 2017.
2. Pay All 2017 State Income Tax Now
The tax bill specifically states that you may not prepay your 2018 income taxes and receive a tax deduction, as as deductible state, local, and property taxes in 2018 will be limited to the $10,000 annual cap. But, you should consider paying all 2017 state taxes owed by December 31, 2017, so that you can fully deduct those taxes in 2017. Again, you may wish to check with your tax preparer to make sure that this does not subject you to the alternative minimum tax in 2017.
3. Accelerate Charitable Giving
The tax bill includes a higher standard deduction and fewer itemized deductions. If you believe that your 2018 itemized deductions will be lower than the 2018 standard deduction, you may want to move 2018 planned giving up to this year. In the future, you may want to group your donations into payments every two to three years, so that you maximize the benefit of charitable donations.
4. Harvest Tax Losses
If you have sold property or securities for a capital gain in 2017, you will need to “harvest losses” by selling other securities in that portfolio to offset those gains. Bear in mind that you may not be aware of all capital gains, as these will include portfolio adjustments from mutual funds. So, you may want to consider aggressively harvesting tax losses. We would be happy to collaborate with you and your financial advisor on these matters.
Please contact us to learn more or to schedule a one-on-one consult on how the changes will affect you.