Last week, President Trump signed tax reform, officially titled ‘An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,’ into law.
The legislation provides significant permanent tax cuts for businesses, including reducing the corporate tax rate from 35 percent to 21 percent. Most individual taxpayers will also receive tax benefits, including lower marginal tax rates. However, all of the individual tax breaks will expire before 2026.
In addition, “…the standard deduction has been raised from $6,350 for singles and $12,700 for couples filing jointly to $12,000 and $24,000…With the standard deduction raised to $24,000, many folks will take the standard deduction rather than itemize. Taxpayers itemize their deductions when total deductions exceed the standard deduction,” wrote Barron’s.
The new rules won’t go into effect until next year, and that gives you a small window of opportunity. If you act by the end of the year, you may be able to minimize the amount you pay Uncle Sam. For example, you may want to consider:
- Deferring income until 2018, if possible, when ordinary income tax rates may be lower
- Accelerating 2018 planned charitable giving into 2017
- Paying your January mortgage payment by December 31, 2017 as it includes interest for December
- Consider prepaying real estate taxes due in the first quarter and other state and local property taxes before December 31, 2017
- Harvesting capital losses in taxable investment accounts in 2017 and applying net capital losses against ordinary income in 2017 up to $3,000
- Waiting until January to send invoices for payments you typically receive in December, if you are self-employed
One problem with end-of-the-year tax reform is it leaves little time to act. Before making any decisions or taking any actions, please consult with a tax or legal advisor. This is not intended as legal or tax advice.
https://www.barrons.com/articles/its-official-what-the-new-tax-bill-means-for-you-1513795085?mod=hp_pop&(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-26-17_Barrons-Its_Official-What_the_New_Tax_Bill_Means_for_You-Footnote_3.pdf)