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The New Tax Laws: Additional Items to Consider

Mark Smith, CFP®, CPA/PFS, CIMA® - Thursday, December 28, 2017

Given Tax Reform Consider This Before 2018 | M.J. Smith & AssociatesOur team has been busy understanding the details and implications of the newly passed tax laws. We have summarized some noteworthy tax saving takeaways that your tax advisor can help you make the most of with the time left in 2017.

 

  

  • Tax rates for businesses and individuals will be lower in 2018. Therefore, it is important to minimize 2017 income and defer as much income as possible into 2018.
  • If you are a business owner, you have the ability to prepay 2 ½ months of 2018 business expenses in 2017. Based on our understanding at this time, we believe that for most Colorado pass through entity owners (S-Corps, Partnerships, and Schedule C) the Tax Act will cut tax liability from 1.9%-11%.
  • If you are planning to make charitable contributions in 2018, you may want to consider prepaying those contributions in 2017 into an existing Donor Advised Fund. Keep in mind, that a Donor Advised Fund is a sensible way to maximize charitable deductions immediately while retaining the ability to provide a future benefit to your favorite qualified charities.
  • As noted in our previous post, you have the ability to prepay 2018 property tax in 2017. Prepaying your 2018 property tax in 2017 may allow you to receive the deduction for the property tax in 2017.
  • Prepay 4th quarter 2017 state and local income tax liability due January 15th in 2017. (Note: You will only be able to deduct the 2017 tax paid in 2017. You cannot prepare the 2018 tax).
  • You will no longer be able to deduct interest paid on a new Home Equity Line of Credit (HELOC). Existing HELOCs will retain the ability to deduct the interest.
  • The New York Times published a simplified Tax Bill Calculator so you can estimate how the new tax bill will affect your rate.

For many taxpayers, you should consider “grouping” your itemized deductions every other year and taking the increased standard deduction ($12,000 Individual, $24,000 Joint) every other year. By prepaying this year some of the deductions noted above, you may benefit from the standard deduction in 2018. You would then double up on paying deductible expenses in 2019, etc.

We believe that the new tax laws offer a unique opportunity to take advantage of 2017 deductions that will no longer be available for 2018.

 

 

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Mark J. Smith and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

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