Under the new tax bill, add these to your to do list for the next 10 days
The new tax bill has been passed by Congress and is expected to be signed into law this week. That gives you 10 days until December 31 to take care of a few tax items.
- Prepay your property taxes-For Texas homeowners property tax is due Jan 31, but you can pay before year end and avoid the new limit on property tax deductions in 2018
- Don’t Make estimated deposits for state income tax-Just like property tax, state income tax will be limited starting with 2018 tax returns, but the bill specifically prohibits prepaying state income tax, only property tax can be prepaid.
- Go ahead and move-For 2017, you can deduct moving expenses when you make a job change. That deduction goes away in 2018.
- Finalize your divorce-Alimony paid for a pre- 12/31/17 divorce is a deduction from taxes, not for divorces after that date. The other side of this however is if you receive alimony on a post 12/31 divorce, it is no longer taxable income.
- Pay down your mortgage-Starting in 10 days the deductible mortgage interest is limited to $750,000 of mortgage debt. Good news the cap does not apply to mortgages existing before Dec 15, 2017.
- Pay off your HELOC-Home equity loan interest will not be deductible starting in 2018.
- Pay off your vacation home-Interest on second homes will no longer be deductible next year. This includes RV’s, mobile homes and large boats.
- Or rent out your vacation home-Mortgage interest on rental property will still be deductible.
- Defer your year end bonus-Even though you will loose some deductions in 2018, your effective tax rate on income is likely to go down next year.
- Tell your customers to take the holidays off and pay you next year-The tax rate on income from a lot of small businesses will go down in 2018, so wait and collect those receivables in 2018.
- But go ahead and pay your vendors-The other side of that coin is you want to pull expenses into 2017 when you will be paying higher effective tax rates on business profits.
Sorry to the doctors, lawyers, consultants and accountants, we won’t get to benefit from the lower pass-through business tax rates.
- Finally: wait to die-Do your kids a favor, because the estate tax exemption is going to double to $10.98M for folks who pass after 12/31/17.