The Tax Cuts and Jobs Act, which was signed by President Trump on Dec. 22, means substantial tax changes for millions of Americans–many of which will take effect very soon, in 2018.
There are some things you can do–both as an individual and as a company–over the next week, before 2018 begins, that can help you take advantage of some tax benefits that are likely to expire as the new law takes effect. We at Wendroff & Associates wanted to provide you with a few tips:
- Pay any state income taxes you owe before Dec. 31, 2017. For example, if you pay estimated tax payments each quarter to the state, and the fourth-quarter payment you owe to the state is due by Jan. 15, 2018, we recommend paying it by Dec. 31 if you itemize your deductions.
- Pay state and local real estate taxes before Dec. 31, 2017. If you don’t pay state and local real estate taxes through escrow, we suggest to pay an installment by Dec. 31, 2017. If you pay your real estate taxes through escrow, which is usually included in your mortgage payment, you may have to ask your mortgage company if you can make an advance payment. You can pay your real estate taxes If they are assessed in 2017. For example, if the tax assessment is between July 1, 2017 until June 30, 2018, you can pay them before December 31st and get the deduction in 2017. If they are not assessed in 2017, you are not allowed a deduction for them on your 2017 tax return if you prepay them now.
- Accelerate charitable donations in 2017, since most tax brackets are higher in 2017 than 2018.
- Consider accelerating any equipment purchases you need to make. This can be very beneficial, allowing you to take a tax deduction now, and help grow the business in the future. In addition, the deduction in 2017 could have more impact, since most individual and corporate tax brackets are higher in 2017 than they will be in 2018 under the new law.
- Consider purchasing a business vehicle before the year ends, for many of the same reasons as we mentioned above. In addition, you may get a better deal with car dealers, as they may be looking to free up their inventory before the end of the year.
- Pay for business entertainment in 2017. If you have a function such as a sporting event you attend for business reasons, which you would usually pay in 2018, and you are on the cash basis for accounting, you will need to pay for it in 2017 in order to get a tax deduction, since deductions for business entertainment has been repealed for 2018.
If you have any questions about these items, or may be interested in future tax planning services in 2018 because of the Tax Cuts and Job Act, please call our office at 703-553-1099, or send us an email. Happy holidays! And thank you for your support over the past year.