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Old 12-25-2017, 12:45 PM   #1
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NON POLITICAL - 2018 Tax Considerations

Since SMB RIGS HAVE POTENTIAL IMPACT ON OUR TAX FILINGS, especially for those who itemize deductions:

Best to pay all property tax and car registrations in 2017, if possible, to avoid likely loss of ability to deduct in 2018 due to deductible tax limit and raising of std deduction. Any other possible deductions are best taken this year.

Also note: 2018 $10k deduction limit on Prop/Sales/State Income Taxes is the same for Single AND Married. The $10k limit is NOT doubled for Married filers which makes reaching the Married $24k (2x$12k for married) itemizing threshold more difficult.

I have not quite figured out if it is beneficial to significantly over pay my State Income Taxes via an estimated or extension because of the ability to take the deduction this year and then recognize the refund next year at potentially lower tax rate. This one is far more complicated due to many more moving pieces and lack of clarity around some provisions.

Additionally - the Personal Exemptions for self, spouse and each dependent is gone.

Open to constructive financial strategies / ideas without political spin/comments.
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Old 12-25-2017, 01:30 PM   #2
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Ray, interesting thoughts. I'm contemplating the new same-year expensing provision for businesses. Does anyone know if there are approved ways to apply it to past purchases, or can it only be applied to purchases from 1/1/18 forward?

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Old 12-25-2017, 05:29 PM   #3
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I was thinking about this as well. My "2nd home" interest deduction will likely be gone next year. I'll need to figure out if the increased standard deduction will benefit me or not. I did buy a new car this year so hopefully that will put my sales tax paid over my state tax so I can deduct a bit more.


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Old 12-25-2017, 10:34 PM   #4
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If you are planning charitable giving in 2018, consider doing it now in 2017.
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Old 12-26-2017, 07:44 AM   #5
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This is what I received from a tax guy:

Subject: What the Tax Reform Bill May Mean for You





December 17, 2017





I have refrained from communicating with you about the tax reform legislation making its way through Congress until now because the details have been very much in flux. However, it appears that the majority of the details have been agreed upon now. SOME CHANGES MAY STILL OCCUR BEFORE FINAL PASSAGE AND SIGNING but I will only send a follow up communication if the change is significant and greatly affects what I am writing in this memo. (Additional details on the legislation as it currently stands are included in the attached letter which I do encourage you to read.)





THE BIGGEST CHANGE


in the law has to do with the standard deduction which is the amount which can be deducted from your taxable income without having to add up your itemized deductions (typically mortgage interest, real estate and state income taxes, medical expenses and charitable contributions.) Effective January 1, 2018 married couples will be able to deduct $24,000 automatically (up from $12,600 for 2016) and singles will be able to deduct $12,000 in 2018 compared to $6,300 for 2016. As a result many of you will not have to itemize effective with your 2018 tax returns because your total of interest, taxes, etc. will not be greater than the $24,000 you will be able to deduct automatically.





The second major change is a reduction in tax rates.





The final major change (for individual households) is the elimination of personal exemptions for all members of a household. For most households the increased standard deduction COUPLED WITH an increase in the child tax credit from $1,000 to $2,000 will more than offset this change.








WHAT CAN BE DONE BEFORE THE END OF 2017 TO REDUCE TAX LIABILITIES?


Deductions for 2017 WILL STILL BE CALCULATED UNDER THE CURRENT LAW so you won't notice much of a change in your next tax return. For this reason some deductions may reduce tax liabilities if taken in 2017 but will likely have no impact on your 2018 tax liability if not claimed until 2018. It is these deductions which may be of benefit if claimed before the end of this year (and, to repeat, may be of little or no value if not paid until 2018):





1. Make charitable contributions including car donations before the end of the year. With the higher standard deduction many taxpayers will no longer derive any real tax benefit from charitable donations after 1/1/18.





2. Pay real estate taxes before December 31, 2017.


NOTE: You may not have received a bill for these yet (they usually come out in January) but you are liable now and if you pay before year end you will be able to deduct them in 2017.


NOTE ALSO: This may be easier said than done. You will probably have to contact your county to find out how this can be accomplished.





3. If you are planning to buy a high dollar value purchase subject to sales tax (a car, for example) you might want to do so before the end of the year to (potentially) be able to deduct the sales tax paid. (If you are unsure about this, please give me a call.)





4. Purchase a brand new all electric vehicle to claim the tax credits.


NOTE: Do not do this without contacting me first. This credit is not automatic and requires all rules be followed to qualify for it. In fact, the odds are that even if you try to capture this credit before year end you will not be able to do so.








FOR THE RECORD:





1. Yes, for most of us this tax law will reduce our tax liability in 2018 given the same family status and same income. There will be a few situations (see one discussed in my FINAL NOTE below) where the type of income earned could cause an increase in your taxes due to various factors but those will be exceptions.





2. The medical deduction is retained in the new law.





3. Student loan interest will still be deductible (but may not be fully deductible at higher incomes [which is already the case])





4. The child tax credit will be doubled to $2,000 per child under the age of 17 (up from $1,000 under current law.)





5. A child care credit has been retained. (Details to be determined.)





6. Mortgage interest will still be (potentially) deductible for mortgage amounts up to $750,000.





7. The sum total of taxes paid will be deductible up to a cap of $10,000.





8. The Alternative Minimum Tax for individuals has been retained but will affect fewer taxpayers nationally (and even fewer in Colorado where it is uncommonly applied anyway.)





FINAL NOTE TO FREQUENTERS OF LAS VEGAS AND CENTRAL CITY: Gamblers are only able to deduct losses to the extent of winnings AND "winners" can only deduct those losses by itemizing deductions. This means if you win you will very likely have to pay taxes on the amount you win without getting a dollar for dollar deduction on your losses. The old adage "be careful what you wish for" will have yet another reason for resonating.





In closing: if this legislation is of interest to you, I do recommend you read the attached summary of the major changes for a little more exposition on the subject.





I ask any of you who may have moved this year to update your address with me.





I do hope all of you will have a great Christmas and Holiday season.





Feel free to call if you have any questions about this (but give me a little time to get back to you as it is the Holiday season after all!)





Dave


303-665-8892







--


David L Ryan
PO Box 414
Louisville, CO 80027
Phone: 303-665-8892
FAX: 303-661-0116
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Old 12-26-2017, 07:53 AM   #6
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Quote:
Originally Posted by 1der View Post

I have not quite figured out if it is beneficial to significantly over pay my State Income Taxes via an estimated or extension because of the ability to take the deduction this year and then recognize the refund next year at potentially lower tax rate.
...Interesting idea....not sure it will matter much though.....
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Old 12-26-2017, 01:51 PM   #7
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Ya know,it's nice,being retired and making enough on SS to be comfortable but not enough to have to deal with ALL that BS!! your talkin about

Happy and Safe New Year to All
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Old 12-26-2017, 08:36 PM   #8
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winmag4582001 I love that your cpa is proactive and seems to actually care about his clients
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