It’s hard to believe that we’re coming to the end of another year! As we get ready to wrap up 2017, we’re getting lots of questions about the new tax law working its way through Congress, and how it will affect our clients.
As I write this, the bill is in a joint committee, which means a group of members of the House and Senate are sitting down to combine the House and Senate versions. Once they’ve completed their work, the joint bill must be passed by both the House and the Senate, and then signed by the President, before it becomes law. There are many differences between the two bills being reconciled, but we can guess at some of the things that will emerge.
So how can you position yourself to take best advantage of what is likely to become law? We have a few suggestions.
Consider deferring income into 2018
It is possible that you will be in a lower tax bracket in 2018 than you were in 2017. If you can control when you receive income, you might want to wait to receive it until January. For instance, if you’re in business for yourself, you could send out your invoices late in December, so you wouldn’t receive the income until January. If you haven’t put money into a tax-deferred retirement account yet this year, or if you haven’t maxed out your contribution, this would be an excellent time to do that.
Push deductions into 2017
It seems likely that the standard deduction will be raised high enough that many people who currently itemize won’t be able to anymore. If you are able to itemize your medical deductions, you could make sure to pay all your bills in 2017. Track your mileage and parking for doctor appointments. If you donate to charity, you could make your January payment in December. A donation charged to a credit card in 2017 is deductible in 2017, even if you don’t pay the bill until 2018.
Do you have stock that’s worth less than you paid for it?
Consider selling it in 2017. You’ll be able to use that loss to offset gains, and can take a loss of up to $3000 over the amount of gains for the year, reducing your other income.
Are you going to purchase a vehicle or construction materials?
You will want to do that in 2017. The sales tax on both will be deductible on your 2017 tax return, but it’s on the chopping block for 2018.
Do you deduct expenses associated with your job?
If you have unreimbursed expenses for your job, like union dues, mileage, small tools, uniforms, and so forth, pay for them in 2017 and keep the receipts.
As the process moves forward, I encourage you to contact your representatives to share your opinions on what is important to you. You can find and email your Senators here: https://tinyurl.com/7jw9qov And here is the site to find and email your Congressional Representative: https://tinyurl.com/y9xgqgkg
As we learn more about what is likely to be passed we’ll share that too. In the meantime, let us know if you have any questions, we’re always happy to help with tax planning. Enjoy the holidays, and we’ll see you in the spring!