Tax law changes are here! On December 22, 2017, President Trump signed tax reform bill, with most of the provisions taking effect in 2018. With only one week left in 2017, you can take these actions to save money now.
Starting 2018, the standard deduction for a married couple is increasing to $24,000, meaning most people will take the standard deduction rather than itemizing. That's why you should take as much deduction in 2017 as you can.
Make an extra mortgage payment before year’s end
If you pay your mortgage on 1st week of the month, paying January payment before December 31, 2017, will increase your mortgage interest expense deduction. Mortgage interest remains deductible but with higher standard deduction, most people won't be able to take mortgage interest deduction in 2018.
Buy your dream car now!
If you are planning to buy a new car, buying it before December 31, 2017, will allow you to deduct sales tax paid on your 2017 tax return. With tax reform changes, it will be difficult to take this deduction in 2018.
Give to Charity
With higher standard deductions, most people won't benefit from charitable donations deduction in 2018. You should maximize your charitable contribution in 2017 and pay before December 31, 2017, to be deductible in 2017 tax return.
Defer Income and Accelerate Expenses
With lower tax rates in 2018, it is better to hold off on adding more income to 2017. Of course, not everybody can take advantage of this but self-employed individuals can try to defer receiving income from 2017 to 2018 and accelerating expenses to 2017.
Pre-pay property tax if assessed in 2017
The tax reform limits deduction for state sales and property taxes to $10,000. Because of higher standard deduction and state tax deduction limit of $10,000, most people will benefit from pre-paying 2018 property tax by December 31, 2017. On Wednesday, December 27, 2017, IRS issued an advisory stating that prepaid property tax is only deductible in 2017 if it's assessed in 2017. Click here to read more about it.
Still time to get health insurance through Marketplace
The new tax bill repeals Obamacare’s individual mandate starting 2019. Remember, people still need to have minimum coverage standards set by the Affordable Care Act in 2018 or face penalty of up to 2.5% of income. Although enrollment period for marketplace plan ended December 15, 2017, people in the hurricane-impacted area are eligible to buy insurance through December 31, 2017.
Contact us to discuss how to take full advantage of these tax savings.