The pending Tax Cuts and Jobs Act has resulted in much uncertainty as 2017 comes to a close. This has created an environment in which year-end tax planning is even more crucial than in previous years. Some areas are worthy of a harder look this year:
With the potential for a higher standard deduction coming into play, less people will be able to itemize their deductions going forward. This makes 2017 a great time to give to charity whether through the donation of items or funds.
Medical Expenses Deductions
If you or a member of your family is in need of medical care, consider taking care of it or prepaying (such as in the case of braces for your kids) before the end of 2017. The House version of the bill calls for the elimination of the medical expenses deduction while the Senate version proposes reducing the threshold for the deduction.
Making 2018 property tax payments before the end of 2017 may be a good idea for some. The latest version of the Senate tax bill would cap the deductible amount of state and local property taxes at $10,000.
State Income Taxes
Both House and Senate versions of the bill call for the repeal of the state and local income tax deduction. As a result, you may want to consider paying your state income taxes before the end of the year if you are expecting a balance to be due. One thing to keep in mind, though, is that paying this tax now may trigger the alternative minimum tax, or AMT.
Home Equity Loan
Do you have a home equity loan? The interest on this loan may not be deductible in 2018. If you can't pay off the loan or refinance, consider making this loan a priority to pay off quickly moving forward.
This is not an option for everyone, but if you are self-employed or are paid on commission, you may find benefit in deferring those earnings into 2018. Why? The proposed tax bill has tax rates falling at multiple levels. The same is also true for business owners who may be taxed at a lower rate on business income next year.