There’s a lot of buzz – and rightfully so – over the latest tax bill! We haven’t seen reform like this in three decades, and there will be a lot to cover. Like most things tax related, careful planning that meets your unique circumstances will be critical for 2018. We anticipate that there will be more to come on that…
In the meantime, here is a short list of ideas that can apply, in most circumstances, to help lower your 2017 federal tax liability:
- Pre-pay your state and local income tax liability by 12/31. Beginning in 2018 the combined state/local/property tax deduction is capped at $10,000. If you are in the top tax bracket and accelerate your fourth quarter payment you could possibly secure a deduction worth 39.6% of the pre-payment. This play is not effective if you are in alternative minimum tax (AMT).
- Pre-pay your Ohio real estate taxes. Ohio’s real estate taxes are paid in arrears which makes this play possible for those municipalities that allow it. You can look up your real estate tax liability online through your county auditor’s website. Again, this play is not effective if you are in AMT.
- Accelerate charitable donations. With a reduction in tax rates next year a deduction during 2017 is generally more powerful than a deduction in 2018. Consider opening a donor advised fund if you’d like to secure the deduction now but wait to fund a charitable organization later.
- Make your January mortgage payment in December. An extra month of mortgage interest may be more powerful in 2017 not to mention some taxpayers will no longer itemize deductions beginning in 2018 with the increased standard deduction.
- If you report your business activity on the accrual method of accounting for tax purposes be sure to pay special attention to year end accruals and payables. Many companies are not required to have their financial statements externally reviewed or audited by independent CPAs. If your statements are prepared by internal resources (only) make sure your accounting staff records the proper deductions for 2017.
As always, one-size does not fit all when it comes to your tax situation, and it is important to discuss any planning ideas with your tax advisor before making any significant changes to your tax strategy.
Be on the look-out as we analyze specific provisions of the bill to help you plan for 2018 forward. Stay tuned to the Barnes Dennig Blog for more updates on the tax reform legislation. Contact a Barnes Dennig representative today to discuss your tax strategy, and see if any of the avenues discussed above make sense for you.