President Trump has signed the Tax Cuts and Jobs Act of 2017 and there are a few things you can do before year end to save on taxes in 2017 that might not be deductible in 2018:
- Pay your State Income estimated taxes due in January before year end. Even if they aren’t deductible due to Alternative Minimum Tax, you won’t know for sure until your 2017 return is prepared and you will only be paying them a few weeks early. To clarify, this does not mean pay your property taxes early. Oregon has already been on record as saying nope and the IRS at the national level has said they may not honor early Property tax payments.
Even if you don’t normally make estimated tax payments, and simply pay your State balance due when you file, it’s not a bad idea to accelerate this payment to now (2017) as the Trump plan is limiting SALT (State and Local Taxes) to $10K. This includes State income taxes and property taxes. If you own a home, there is a very strong possibility that you will exceed this $10,000 limit and thus lose out on deducting taxes that you were previously able to deduct.
- Make charitable contributions before year end if you won’t be able to deduct them next year due to the increased Standard Deduction. You can even put them on a credit card now to get the deduction in 2017.
The deduction for Charitable contributions is not going away, but with the increased standard deduction, many people will switch from Itemizing Deductions, to taking the Standard Deduction, thus not getting a benefit for charitable contributions in 2018.
- Miscellaneous Itemized Deductions such as unreimbursed employee business expenses, a home office and tax preparation fees will no longer be deductible in 2018, so make sure they are paid before the end of 2017 to get a deduction. To be clear, these are not items taxpayers normally deduct on self-employment or rentals. These are expenses individuals deduct on their Schedule A as Itemized Deductions.
Most people do not qualify to deduct these expenses as these are limited to a 2% floor of AGI. What this means is they must eclipse 2% of Adjusted Gross Income before the first dollar becomes deductible.
However, many people in the Sales Industry, Real Estate Professionals, and those who are employees of a company that incur job related expenses that are not reimbursed by their employers will be affected. Those who previously qualified for these Unreimbursed Employee Expenses could be assured that their out of pocket expenses (including mileage) would be deductible. I strongly encourage people in the industries mentioned above to work with their employers to institute accountable reimbursement plans to help offset the financial impact these out of pocket expenses directly related to employment that are no longer tax exempt.
For more information, please contact, Baruch Valenzuela at 503.719.6178