The 5 Tax Tips You Need Before New Year’s Eve
The year is coming to an end, but you still have enough time to take ta advantage of the new federal tax code overhaul — while reducing any potential financial hits.
Consider this the highlight reel of the reform. There are 1,100 pages and we haven’t been able to pick through everything quite yet but these are the considerations that impact the largest number of people.
There are some interesting new business items as well and we should have a follow up blog in Mid-January relating to those as they are a little more complicated.
I’ll be taking next week off to spend some time with the family and comb through the 1,100 pages of information to see how it applies to many of you individually.
1. Pay high property tax bills
The new tax code limits couples filing jointly to an annual deduction cap of $10,000 for property, sales, and state and local income tax. Under the revision, the code prohibits people from paying their 2018 income taxes to itemize them for the 2017 year. It doesn’t, though, say anything about pre-paying your property taxes. This means you should be able to pay the property taxes that are typically due in the spring and be able to deduct them for your 2017 tax filing.
2. Pay more toward your mortgage
Taxpayers who itemize will see their standard deduction nearly double. Individuals should see a the deduction of $6,350 increase to $12,000; couples will see the $12,700 deduction reach $24,000. As a result, fewer people are expected to itemize their deductions.
However, if you think you’ll be itemizing this year’s returns, it’s a good idea to make an extra mortgage payment — or pay January’s payment — before the end of the year. That means you’ll be able to deduct that month of mortgage interest, something you might not be able to do on your 2018 return.
3. Pay more toward charity
With itemizing becoming less likely for the 2018 returns, now is a good time to make your 2018 charitable donations. If you think you’ll be itemizing this year’s returns, but won’t have enough to itemize for your 2018 returns, you may want to reach out to your favorite charity and make your donation before the year ends.
4. Take a look at deductions that will expire
The revised tax code eliminates a variety of unreimbursed business expenses through 2025. These include home offices, business computer depreciation, memberships to professional organizations and subscriptions to professional and trade publications. Take a look this year at what you want to renew, and take advantage of the deductions you’ll be using before they are temporarily gone.
5. Take a look at your income timetable – Defer Income anywhere possible
The individual marginal tax rate changes mean most people will pay less taxes on the the same amount of money in 2018 than they did in 2017. Most tax professionals have found that, for the most part, individuals, contract workers and freelancers will be in a lower federal tax bracket and may want to wait to submit invoices until 2018.
Others, though, might find an advantage to seeing those payments come in 2017. The new tax bill revision gets rid of the $4,050 exemption for taxpayers and their spouses and dependents. It also reduces their taxable income.
I’ve read a few articles in regards to a summary of the bill and this one does a pretty decent job of summarizing everything.