November 16, 2017
Accelerating deductible expenses, such as property tax on your home, into the current year typically is a good idea. Why? It will defer tax, which usually is beneficial. Prepaying property tax may be especially beneficial this year, because proposed tax legislation might reduce or eliminate the benefit of the property tax deduction beginning in 2018.
The initial version of the House tax bill would cap the property tax deduction for individuals at $10,000. The initial version of the Senate tax bill would eliminate the property tax deduction for individuals altogether.
In addition, tax rates under both bills would go down for many taxpayers, making deductions less valuable. And because the standard deduction would increase significantly under both bills, some taxpayers might no longer benefit from itemizing deductions.
2017 year-end planning
You can prepay (by December 31) property taxes that relate to 2017 but that are due in 2018 and deduct the payment on your 2017 return. But you generally can’t prepay property tax that relates to 2018 and deduct the payment on your 2017 return.
Prepaying property tax will in most cases be beneficial if the property tax deduction is eliminated beginning in 2018. But even if the property tax deduction is retained, prepaying could still be beneficial. Here’s why:
However, there are a few caveats:
It’s still uncertain what the final legislation will contain and whether it will be passed and signed into law this year. We can help you make the best decision based on tax law change developments and your specific situation.
If you wish to put your family on a better path to understanding the decisions you made in your estate plan, provide them a “road map.”
With the new year comes the need for small-business owners to begin thinking about filing their 2018 income tax returns. The TCJA could significantly alter your tax liability compared to previous years. So refresh yourself on its major provisions.
When you think of April 15, you probably think of the income tax return deadline. But it’s also the gift tax return deadline. Find out if you must (or should) file a 2018 gift tax return this April.