In early November, I highlighted some of the changes that were in the tax reform legislation known as the Tax Cuts and Jobs Act. Over the past several weeks, the deal making process was in high gear as some elements expected to be in the bill stayed, while others were left out of the final version.
Instead of rehashing all of the changes though, I thought it may be worthwhile to point out a few end of year "To Do's" that may be worth considering as a result of the new law.
Pay your property taxes. Beginning in 2018, your state and local tax (SALT) deduction will be limited to a total of $10,000. For Texans, that is your property tax and sales tax deductions. If you have the funds available now, you may want to consider paying your 2017 taxes before year end, even though they may not be due until early 2018.
In some states (but probably not in Texas), you may even be able to pay your 2018 taxes in advance. There may be other issues, such as the Alternative Minimum Tax, that make contacting your tax professional a must before trying to take advantage of this approach.
Make major purchases. If you have put off buying someone special a holiday gift or been on the fence about that new ski boat, you may want to consider doing so before year end. Sales taxes will also be part of the $10,000 limit on SALT deductions starting next year. Curious as to what defines a major purchase?
- A motorized vehicle (car, truck, RV, motorcycle, etc. – sorry, no mopeds).
- An aircraft, boat, mobile home, or manufactured home, but only if you paid the general sales tax rate (otherwise it doesn't apply).
- Building materials for a major renovation or substantial addition to a home, if you paid the general sales tax rate yourself or your contractor was authorized to purchase these materials per your instructions or building contract.
Bunch your deductions. With increased standard deductions and limitations placed on others, the practice of bunching itemized deductions every other year may result in greater savings than just taking the standard deduction. For example, you could go ahead and put two years of your typical charitable contributions into a Donor Advised Fund to get the deduction this year, but wait until next year to make those grants from the DAF. There is still time to do this if you are philanthropically inclined.
Buy next season's tickets. Another part of the tax overhaul scrapped a 30 year practice that allowed season ticket buyers of college sports tickets to deduct a portion of the cost as a "donation". Many colleges are encouraging season ticket buyers to go ahead and pay for future season tickets before year end to qualify for deductions this year.
As previously mentioned, talking to your tax professional before making any decision based upon tax laws is highly recommended. Otherwise, thanks for reading the Accountable Update and have a Merry Christmas!