The much-anticipated U.S. tax reform legislation – the “Tax Cuts and Jobs Act” – was signed on December 22nd by President Trump. The media has already focused on many of the provisions of the legislation, including the lowering of individual and business tax rates, the increase in the standard deduction, expansion of the Child Tax Credit, and much more.
What tax planning action items might you want to consider before the end of 2017?
Considerations for Individuals:
- If applicable, make 4th quarter 2017 estimated tax payments before December 31, 2017. In 2018, deductions for State and Local income and property taxes will be capped at a combined total of $10,000.
- If you are planning on making charitable contributions in the next few weeks or months, try to make them before December 31, 2017 in order for there to be a higher likelihood that they may be deductible on your 2017 taxes. The increased standard deductions that go into effect January 1, 2018 may mean that charitable contributions made on or after January 1, 2018 may not be deductible if the total of your itemized deductions is lower than the new higher standard deductions.
This recommendation also applies to pass-through businesses.
- If you have received a property tax bill that is due in 2018, try to pay it before December 31, 2017, so that it can be taken as a deduction in 2017.
- The new law modifies Sec. 529 educational savings accounts to allow distributions to be used for tuition at an elementary or secondary public, private, or religious school. Therefore, you can make a contribution to either an existing or newly created Sec. 529 educational savings account in 2017 and receive a deduction on your 2017 New York state tax return. These funds can then be used in 2018 for elementary or secondary public, private, or religious school expenses.
- Your estate, gift and generation-skipping tax strategy should be reviewed, and may need to be revised, as the basic estate tax exemption has been doubled to approximately $11 million, indexed for inflation. Please contact your Tronconi Segarra & Associates tax advisor to schedule a meeting to discuss this further.
- Expenses that will no longer be deductible beginning in 2018 include, but are not limited to, the items listed below. If possible, consider accelerating payment of these expenses by December 31, 2017.
– All foreign property taxes (property not located in the U.S.).
– Interest on home equity loans or lines of credit.
– Unreimbursed employee expenses.
– Tax preparation fees.
– Investment advisor fees.
– Union dues.
– Safe deposit box fees.
– Home office deduction.
Businesses may want to consider the following:
- The law extends and modifies Sec. 168(k) Bonus Depreciation, allowing businesses to begin (for property acquired after September 27, 2017) to immediately deduct 100% of the cost of eligible property in the year it is placed in service, through the year 2022. The amount of allowable bonus depreciation would then be phased down over four years: 80% would be allowed for property placed in service in 2023; 60% in 2024; 40% in 2025; and 20% in 2026. (For certain property with long production periods, the above dates would be pushed out a year.)
Further, the new law now makes Sec. 168(k) Bonus Depreciation available for used property, as well as new.
- If possible, accelerate payments of interest into 2017, as certain limitations on the deductibility of interest will go into effect beginning in 2018.
- For businesses that may incur an operating loss in 2018, please contact your Tronconi Segarra & Associates tax advisor as soon as possible, to discuss possible planning options, in light of the new rules for business losses, under the new law.
- Fiscal year businesses are likely to experience certain differences under the new tax law than calendar year businesses, due to differences in effective dates for various provisions under the new law. If you are a fiscal year business, we encourage you to contact your Tronconi Segarra & Associates tax advisor as soon as possible.
Most of the new tax law provisions go into effect in 2018 and after; your Tronconi Segarra & Associates tax advisor will work with you during the upcoming months to identify the most appropriate tax planning strategies to maximize your benefits under the provisions of the new tax law.
Please contact any Tronconi Segarra & Associates LLP tax advisor at 716.633.1373 if you have any questions or wish to act on any of the information provided in this advisory.
Merry Christmas, Happy Holidays and Happy New Year!