Admittedly we are not Certified Public Accountants and so we are NOT directly rendering specific tax advice. Rather, we will leave that to your CPA, whom undoubtedly already reached out with their own recommendations and advice.
Inasmuch as the tax law changes may impact whether or not you continue to file a schedule A on your income tax return in years 2018 and thereafter, we are looking ahead and note that it may be advisable for you to discuss with your CPA whether or not you should pre-pay 2018 property taxes (especially if they exceed $10,000 per year) right now, before 12/31/2017.
The passage of this tax bill so late in the year did not afford us a lot of time to digest it and communicate strategies, however to our point in the previous posts, it may be a viable strategy for some American taxpayers to File a Schedule A; i.e., to itemize your deductions, every other year.
In the off years, you would simply take the $24,000 married standard deduction. You would achieve this largely by paying two years’ worth of:
- property taxes and/or
- charitable contributions and/or
- elective medical expenses
The TCJA already forbade taxpayers from prepaying state and local income taxes prior to 12/31/17, so that avenue is effectively closed.
However, actions to be taken prior to 12/31/17 may then include prepaying 2018’s property taxes and anticipated charitable contributions, as well as bunching any elective deductible items before December 31st, and possibly deferring income into 2018, if you have that capability in any self-employment entities.
PLEASE NOTE: Finally, medical expenses will only be deductible to the extent they exceed 10% of AGI this year, and then 7.5% of AGI in years 2018 and 2019 as we read the law, such that any elective medical procedures that you may anticipate having either next year, or in the next few years may well be paid for prior to 12/31/17 or in the subsequent two years. (In other words, if you were looking to get new pair of glasses or new hearing aids you may want to go ahead and pre-pay the cost of those before 12/31/17.)
If you are in the middle of divorce proceedings, please do not finalize any agreement without expert advice from your CPA, since alimony will not be deductible under the new Tax Cuts and Jobs Act. You will want to ensure the desired after-tax amount will still be received, if it means reclassifying some of the payments as child-support, so be it, presuming there are children involved in the family unit.
More questions?? Don’t hesitate to call us at 973-706-8924!
To your Empowerment,