- The Republicans might pass their tax-reform bill before the end of the year.
- Since President Donald Trump’s tax plan is not yet finalised, it remains to be seen exactly how everyone will be affected by tax reform.
- Still, there are some things taxpayers can do before the end of 2017 to get ready.
The Republicans’ tax plan might be passed soon.
In case it does, there are some things you can do now to prepare for the looming changes. Although a final version of the tax bill remains to be seen, there are certain steps folks can take now to get ready in case tax reform goes into effect for 2018.
The team at TaxAudit, an audit defence service, came up with several tax moves to make before 2017 comes to a close.
“No one knows for certain if a tax bill will pass before the end of the year, how the Senate and House bills will be reconciled, or what the final product will look like before it goes to the Joint Committee on Taxation,” Dave Du Val, TaxAudit’s chief customer advocacy officer, said.
“Nevertheless, there are provisions where the two bills are in agreement,” he continued. “It’s a compelling reason to be proactive with your end-of-year planning.”
We put together five key things to think about doing now.
Pay your 2017 state income tax in full.
It’s possible that the state and local income tax deduction will be axed or reduced in the upcoming tax bill.
The TaxAudit team recommends making sure you’ve paid every penny of your 2017 state and local tax bill before December 31. That way, you can take advantage of the deduction this year.
Taxpayers who make estimated tax payments have until January 15 to pay their fourth quarter 2017 taxes, but you could save more by making that final payment before the end of the year.
Pre-pay your property taxes for next year.
Deducting the full amount of your current property tax bill in 2017 might provide a larger tax benefit if your tax rate goes down next year under the new plan, TaxAudit says.
If your property tax bill is greater than $US10,000, you’ll also be able to deduct more of it by paying next year’s bill early.
Think about what possible changes to the AMT might mean for you.
The alternative minimum tax (AMT), which prevents wealthy taxpayers from using too many tax breaks, might be eliminated.
“The current AMT may make your state and local income tax and property tax deductions less beneficial if you are subject to AMT,” the TaxAudit team says. “However, even if subject to AMT in 2017, you may benefit more by taking these deductions in 2017 rather than possibly losing those deductions entirely or in part in 2018.”
Most of the people affected by the AMT earn over $US500,000,according to Tax Policy Center. It is more likely to affect those who are married, have large families, or live in high-tax states.
If you’ve been planning to buy a car, do it before the end of the year.
Buying a car before the end of the year might be a smart idea for taxpayers in states with no state income taxes who itemize and claim the sales tax deduction, according to TaxAudit.
The purchase also provides a deduction on vehicle registration fees, which will likely be eliminated under the new bill.
Contribute to charities.
December is the season of giving. But if the holiday spirit is not enough to inspire you to donate, then there is also a tax incentive.
If you think your itemized deductions next year might not exceed the proposed new higher standard deduction, you might want to think about making your 2018 charitable contributions this year, TaxAudit says.