H2R CPA Blog
Tax Reform Resource Center
by Paul K. Rudoy, CPA/PFS
We are in a period of uncertainty with two tax bills proposed and nothing finalized. However, there are two items that every taxpayer should look at before year-end: state & local tax and charity.
State and local tax deductions (SALT)
The State and Local tax deduction is very likely going away. Therefore, if you pay state and local estimated tax payments, you should consider paying your fourth quarter estimated tax payments in December as opposed to waiting until January 15. You might also want to consider paying the first quarter of 2018’s expected estimated tax payment in December to get a deduction that will not exist any longer.
Of course nothing in taxation applies to everyone. If you are an Alternative Minimum Tax (AMT) payer, paying your SALT payment earlier will not help you. Also, if you stretch to paying your April 2018 payment in December 2017, take a look and see if this will cause an over payment that could increase your taxable income for 2018.
by H2R CPA Team
As the holiday season quickly approaches, gift giving will be top of mind. While gifts of electronics, toys and clothes are nice, making tax-free gifts of cash using your annual exclusion is beneficial for both you and your family.
Even in a potentially changing estate tax environment, making annual exclusion gifts before year end can still benefit your estate plan.
Understanding the annual exclusion
The 2017 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free without using up any of your $5.49 million lifetime gift tax exemption. If you and your spouse “split” the gift, you can give $28,000 per recipient. The gifts are also generally excluded from the generation-skipping transfer tax, which typically applies to transfers to grandchildren and others more than one generation below you.
The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can also avoid gift and estate taxes.
by Paul K. Rudoy, CPA/PFS
Based on what we know to date, taxpayers should look at accelerating deductions. Mortgage interest deductions are being proposed to be limited to $500,000 for new debt, property tax deductions limited to $10,000 and with the doubling of the standard deduction, taxpayers’ charitable and medical deductions may not save you on taxes for 2018 and on.
If you are a generally charitable person, you may want to consider a Charitable Trust, Donor Advised Fund or Private Foundation to accelerate deductions into 2017 for your future years’ donations.
If you generally are able to deduct medical expenses, you should accelerate those expenses into 2017. If you are not paying Alternative Minimum Tax (which is being repealed in the tax bill proposed), you should also look at paying your property taxes and your state and local income tax estimated tax payments in December as opposed to waiting until January or even your April balance due.
Stay tuned as we learn more.
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