2017 Tax Reform Update
You’ve probably seen that the House and Senate have passed their own versions of tax reform and will now try toarrive at a final form to put on the President’s desk for signature. Since the two versions are substantively similar, our opinion is that the bill will be signed into law, probably sometime around Christmas. While it’s technically possible that changes could be retroactive to the start of this year, in reality we expect most provisions of the law to go into effect on January 1, 2018 (and some even later).
Without knowing the final law, we don’t recommend that you attempt any drastic changes at this point. However, most people will be better off taking more deductions this year and deferring income to 2018. More details on that are below, and you should double check with your tax person since your circumstance is unique.
In general, deferring income to 2018 and later will be a wise strategy because tax rates should be somewhat lower in the future.
Taking more deductions in 2017 should also be a benefit, as some itemized deductions will not be available going forward and the standard deduction will be higher. This advice makes sense almost every year, but especially now given the expected change in the tax code.
With the standard deduction increase, many people who are itemizing deductions now won’t do that beginning in 2018. If that’s you, it might make sense to take deductions in 2017 that wouldn’t provide a benefit in future years. Here are ways to do that:
Make your January mortgage payment before 12/31/17
Pay both halves of your current property tax bill before 12/31/17
Take more charitable deductions in 2017 than you normally would (Donor advised funds are a good way to “pre-fund” future charitable contributions. We can explain these to you, and talk to you about giving appreciated assets instead of cash.)
Pre-pay your 2017 state tax liability (ordinarily would be due in April 2018) in 2017 so that you can deduct it.
Please let us know if you have any questions about this. We will keep you updated as things are finalized.