In light of the new tax bill the basic advice is this: do everything you can to load up on tax deductions in 2017.
The tax rates are going down next year, so a deduction now is worth more that it will be in 2018. On top of that, several popular deductions are disappearing next year or getting substantially limited. But if you act now, you can get the tax savings you had hoped to take in 2018 for your 2017 return.
Here are five steps to consider doing before January 1 to maximize your tax savings. Most of these savings will relate to those taxpayers who itemize deductions.
1. Give more to charity in 2017
Have you been meaning to donate items to Salvation Army or Deseret Industries? Or do you feel like it may be time to give a little more to your religious institution or alma mater? It will help reduce your income this year when tax rates are higher. Plus, you might not end up itemizing next year since the standard deduction is nearly doubling.
If you take the standard deduction in 2018, you won’t get any tax savings from your charitable contribution.
2. Pre-pay your 2018 property taxes
If you own a home, you are familiar with property taxes. At the moment you can deduct your local property taxes from your federal income tax bill, but starting January 1, there’s a $10,000 limited on all of your state and local taxes, including property taxes and W2 state tax withholdings.
These payments will need to be recorded by December 31st.
3. Make your business expenses now
If you pay union dues, a professional society membership fee, or buy a lot of supplies for your job, you’ll want to buy everything you can by year’s end. At the moment, people who are classified as employees can deduct a lot of their unreimbursed business expenses on their taxes if the total is more than 2 percent of adjusted gross income. But that deduction is going away entirely in 2018.
4. Max out as many other deductions as you can
For example: Max out your 401(k) or IRA retirement plans if you have the chance. Another tactic is to try and prepay the interest on your home equity line of credit. The home equity line of credit interest deduction goes away in 2018 so it’s worth calling your bank to see if you can prepay part of the interest. Another deduction that will go away in 2018 is your fee for income tax services on a personal level.
5. Delay income until 2018 (if possible)
It’s also a good idea to try to delay income until January when the tax rates are lower, especially if you are a small-business owner. So if you are chasing some customers or clients to pay the bill you sent them a while ago, you might want to wait until January to really get aggressive on collecting. Also, defer that year-end bonus until January if you can. In addition to lower tax rates, small business owners get a generous benefit starting next year of being able to deduct 20 percent of their business tax income tax-free.
All of this sounds like a lengthy “to do” list at a time of the year when you just want to relax with family, but an hour of two of work could mean generous tax savings.
Information provided by:
Elite Tax & Accounting
735 E 9000 S Suite 100
Sandy, UT 84094
David J White CPA
Scott Itri EA