How’s the holiday shopping going? Getting the gifts wrapped? Forget anyone? Well, what did you buy yourself this year?
OK, I KNOW this doesn’t sound as fun as beach vacations, new jewelry or an iPhone 8, but …if there is a chance you might owe state or local taxes this year, this should be the gift you give yourself!
If you usually owe state or local taxes or expect to this year don’t wait for January or later to make that payment.
Two things almost certainly going to be in the final Tax Relief Act are state and local taxes will no longer be deductible, and the new laws will take effect in 2018.
If you owe taxes for the current year (2017) it has always been a good idea to pay by December 31 so you can take the deduction in the year paid. However, up until now, if you wanted to wait until January 15th or the date your tax return was due, you would be able to deduct the following year so it was not a big deal to pay before year-end.
Many tax preparers used this as a planning tool, but it only gave you the deduction earlier. However, this year it might be the only way to take that deduction, as most reliable sources expect the state and local tax deduction to be eliminated in 2018.
And, anyone who is self-employed and paying estimated taxes has no reason to wait until January 15th to make that last estimated tax. In fact, I would consider not paying federal taxes to ensure the entire 2017 potential tax liability is paid in full by year end. If you have limited available funds, don’t short both federal and state, pay all of the state tax and as much federal as you can afford.
Worst case: you pay two weeks early and enjoy the tax deduction while the tax rates are higher.
A little planning will always go a long way, but this year it’s imperative.