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’re among the families with less exposure to estate tax liability post-TCJA, it’s time to adjust your estate planning strategy to concentrate on reducing income taxes. If state income taxes are a concern, one tool to consider is an incomplete nongrantor trust.
Family businesses often depend on their founder to maintain the company’s success. But eventually that owner will have to depart the business. Depending on the circumstances, the family itself may be thrown into chaos. A solid succession plan can help prevent this.
If you’re thinking about giving holiday gifts to employees or customers or throwing a holiday party, be sure to consider the tax consequences, both for you and for the recipients of your generosity.