The New Tax Bill–Tax Tips for 2017
SALT-State And Local Taxes:
Starting in 2018, the total state taxes (Mass. and other state income taxes) and local taxes (real estate taxes) are limited to $10,000 overall. What this means is that if you have Mass. estimated taxes due for the 4th quarter, you should consider paying them before December 31, 2017. If they are substantial, you should contact my office, so that we can determine if the entire amount should be paid in 2017, since alternative minimum taxes could be applicable.
If you have been billed for real estate taxes, you should pay these before December 31, 2017. You should not prepay real estate taxes for 2018 that you have not been billed for, since they are only deductible, if they are considered a liability, They are not considered a liability unless you have received a bill.
Deductible mortgage interest will be limited to the mortgage interest on a maximum mortgage of
$750,000 starting in 2018. If your mortgage is greater than $750,000, the deductible portion of the interest will be allocated.
Starting in 2018, interest on equity loans and equity lines of credit will no longer be deductible.
Although deductible charitable contributions are not exactly affected by the new tax law, you may want to make additional contributions before December 31, 2017, because the tax rates will be lower in 2018, and also because the standard deduction will be raised substantially in 2018, and many people will not be able to itemize in 2018.
Unreimbursed Employee Business Expense:
These will no longer be deductible starting in 2018.
Standard Deduction vs Itemized Deductions:
Starting in 2018, the standard deduction will be $12,000 for single filers and $24,000 for married filing jointly. What this means is that if your current itemized deductions are less than or close to the $24,000 for married filing jointly and $12,000 for single, you may not be able to itemize starting in 2018. Under certain circumstance, especially in cases where the itemized deductions are close to the limit, with careful tax planning, you may be able to itemize every other year. We can discuss this when we meet during this coming tax season.
Starting in 2018, taxpayer, spouse and dependent exemptions will no longer be deductible.
In summary, tax rates will be lower in 2018 than they are in 2017. Therefore, if possible, income should be deferred to 2018 and deductions should be accelerated in 2017.
Midge L. Belcourt, CPA, MBA, MST, CGMA