The Tax Cuts and Jobs Act is voluminous, so I will address four or five salient points in subsequent posts. Stay tuned for even more information on how the new tax bill will affect you and your finances. And of course, we will identify particular money-saving strategies.
First, pull out your tax return from last year and see if you filed a Schedule A called “Itemized Deductions.” If you did, there will be several changes that could affect you for 2018 filing and we may want to make adjustments in the remaining days of 2017 in order for you to minimize your taxes.
If your property taxes are over $10,000 please note that in 2018, and presumably thereafter, you will only be able to deduct a maximum of $10,000; hence any excess property taxes paid will not be tax-deductible. If this figure is sizable you may consider pre-paying your 2018 property taxes before December 31st in order to garner the deduction in full.
Back to last year’s return: note the final figure on Schedule A. If that total figure is not greater than $12,000 and you are a single taxpayer, or $24,000 if you are a married-filing-jointly taxpayer, you will most likely not be itemizing your deductions in 2018 and thereafter.
If either of those are the case, you may wish to accelerate your charitable deductions before December 31st in order to take the full tax deduction on your 2017 Schedule A. You may also wish to pay for certain elective medical expenses if you have any chance of those totaling more than 10 percent of your adjusted gross income, which is the 2017 threshold for deductibility.
If you are self-employed as a sole proprietor, LLC, S Corporation or other pass-through entity, you might want to check with your accountant to see if it makes sense to defer part of your income into next year. Pass-through entities will be able to deduct 20% of their qualified business income in 2018, subject to income limitations.
We will cover the brackets in our next post, but for now, suffice it to say the deductions matter a lot in determining your taxable income and hence into which tax bracket you ultimately fall.
To your continued Empowerment,