The 2017 Tax Cuts and Jobs Act has passed out of Congress and will become effective on 1/1/2018. There are a few things you may be able to do in the remaining days of 2017 to minimize your tax liability considering the changes in the new tax law.
Pay balance of 2017 State Income Tax Payments now*
If you make estimated state income tax payments, you should make your 1/15/2018 payment this month. If you expect to have a 2017 state income liability in excess of your estimated payments, usually because you expect your taxable income to be higher in 2017 than 2016, you should consider paying in an additional sum to your state so that the entire amount of your expected 2017 state tax liability is paid in during this calendar year.
Pay real estate taxes early*
If you have been billed by a municipality for real estate taxes with a payment(s) due in 2018, you should make that payment(s) this month.
Make charitable contributions now
For many taxpayers, the deductibility of charitable contributions will be constrained starting in 2018. If you plan to itemize deductions in 2017, and you are thinking of making near-term charitable contributions, make those now. If you have pledges to charities for payment in 2018 or beyond, you may wish to accelerate your payments to include as much as you can in 2017. Another strategy is to contribute a few years worth of your expected charitable contributions now into a Donor Advised Fund. This allows you to take the deduction in 2017, and payout the charitable gifts in future years. Using appreciated securities to fund a Donor Advised Fund yields even greater tax savings.
Self-Employed – defer income and accelerate expenses
If you are self-employed in a qualifying business, your tax rate may be lower in 2018 than this year. If this is your situation, you should consider deferring income into 2018 and maximizing expenses in 2017.
Everyone’s tax situation is unique to their own circumstances. Some of the above strategies may not be applicable in your individual situation. Before taking any of the above actions, we recommend that you consult with your financial planner or tax advisor for advice that is specific to you.
*If you will be subject to Alternative Minimum Tax (AMT) in 2017, these two strategies do not apply to you.