If you typically pay taxes with your business or personal tax return, you have a unique planning opportunity that requires action before year end. If passed, the new tax relief act will most likely be implemented for January 1, 2018. Which means: many taxpayers should consider paying their state and local taxes prior to year end.
If you pay estimated taxes, typically owe state taxes, or have a unique situation this year that could require state and local tax amounts owed for 2017 or 2018, paying the taxes by December 31, 2017 – not the due date of January or April 2018 – will ensure the payment is deductible. Tax payments are deducted in the year that they are paid, not owed, so if you pay your 2017 prior to the January 15, 2018 due date, you will be able to deduct in 2017. This is always good planning, but this year the state payments made in 2018 – even if for tax owed in 2017 – may not be deductible at all.
This type of tax reform happens once a generation, so don’t miss out on the planning opportunities it will bring. Reach out to your tax preparer or consider engaging someone who is knowledgeable and proactive with the new laws proposed. You will not get a second chance to get this right. Also, be sure to share transactions or plans for unique items in 2018 with your tax advisor, as you can possibly make moves prior to year end that can help.
Another item: this is not the year to be taking any income that can be pushed to 2018 when the rates will most likely be lower. Income tax deferral is always part of a quality tax plan, but this year it can bring huge savings if managed correctly.
Please contact me if I can offer any assistance. My clients get free advisory calls anytime during the year, and now I am currently offering them to anyone hearing of my F-Sharp Tax Tips posts.
Plan Now, Save Later.