The tax code is undergoing some major changes next year. I’m no tax expert, but perhaps some of my readers are? I’d love to hear you thoughts in the comments!
Many people who currently itemize their expenses will be taking a standard deduction next year as the there are new limits on local tax deductions and the standard deduction for those couples who don’t itemize will jump from $12,700 to $24,000.
Some good strategies include:
- Make additional charity payments in 2017. This definitely makes sense if you won’t itemize next year, but will also make sense if you expect your marginal tax rate to go down next year. It can also help to move other itemized deductions to 2017 if possible.
- Pay property and local income taxes. There will be a limit of $10,000 in deductions for state and local income/property taxes next year. You can’t prepay local income taxes, but you can make estimated payments for current liabilities. You can pay 2018 property taxes if they’ve been assessed, though there’s a lot of confusion about what exactly you can or can’t deduct, so you’ll want to speak to an accountant about that.
- 529 plans are currently intended for post-high school education, but will work for private K-12 schools starting next year. However the changes remain murky. Many states allow you to deduct 529 contributions from your local income taxes. The growth of the plan is also deductible from federal income taxes. Will you be able to put money into a 529 and immediately pay your K-12 tuition bill with that money to save on local taxes? Add that to the list of items to discuss with your accountant.
Again, I’m not a tax professional and you should check with your accountant before making any financial decisions.
What tax strategies will you take advantage of before 2018?