Editors note: This afternoon, Gov. Chris Christie signed an executive order directing local governments to accept prepayment of 2018 property taxes. Go here for more information.
On Dec. 22, President Trump signed into law the first major tax overhaul since Ronald Reagan was president. The measure will shake up life for millions for Americans, but members of the New Jersey Society of CPAs (NJCPA) say that there are moves you can make before Dec.31 that may lower your 2017 tax bill or boost your refund come April.
Prepay Property Taxes
The deduction for state and local income and property taxes will be limited to $10,000 beginning in 2018. However, the provision preventing a deduction for 2018 state and local income taxes paid in 2017 does NOT apply to property taxes. Daniel Marques, CPA, managing associate at Drucker & Scaccetti, recommends that homeowners consider prepaying 2018 property taxes before the end of the year if they will not be in AMT in 2017.
“Contact your local tax collector to find out if the town will accept your 2018 prepayments and how you can pay,” said Marques. “Some localities are allowing prepayments while others are not. If you pay your property taxes through escrow, contact your bank about making prepayments on your 2018 taxes by 12/31/2017.”
Make Charitable Contributions
The tax overhaul still allows you to deduct most charitable contributions. But taxpayers will still need to itemize to claim charitable contributions in 2018 and future years, and that’s a much higher bar with the nearly doubled standard deduction. Consider accelerating your planned 2018 donations to the waning days of 2017 to obtain a current tax benefit or consider use of a donor-advised fund, recommends Neil Becourtney, CPA, tax partner at CohnReznick LLP.
“A donor-advised fund allows you to make a charitable contribution and receive an immediate tax break for the full donation,” said Becourtney. “You can then recommend grants from the fund to your favorite charities over time.”
Pay State and Local Taxes
As stated above, the final version of the tax overhaul specifically prohibits taxpayers from taking a deduction in 2017 for prepayment of 2018 state and local income taxes. But if you pay quarterly estimated taxes, you can make your fourth-quarter payments by Dec. 31 (instead of the Jan. 16, 2018, deadline) and include those taxes paid as part of your 2017 deductions, said Howard Bookbinder, a CPA in Fair Lawn.
Taxpayers should consult with a CPA or other consultant prior to making tax planning moves.
This article was provided by the New Jersey Society of CPAs.
