New Tax Reform: What You Need to Know Now
Like many Americans, you may be wondering what impact H.R.1 "Tax Cuts and Jobs Act" will have on you, your family or business. This article discusses prepaying local taxes in 2017 and positioning yourself for 2018.December 27, 2017
Congress is enacting the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay. Since most of the changes will go into effect next year, there's a narrow window of time left before year-end to best position yourself for the tax breaks that may be heading your way.
Beginning next year, the Tax Cuts and Jobs Act suspends or reduces many popular tax deductions in exchange for a larger standard deduction. Individuals (as opposed to businesses) will only be able to claim an itemized deduction of up to $10,000 ($5,000 for a married taxpayer filing a separate return) for the total of (1) state and local property taxes; and (2) state and local income taxes. People living in Maine, and many other states with high individual tax rates, typically have state income and local property tax bills that are far in excess of the $10,000 limit that will be imposed for 2018.
To avoid this limitation, pay the last installment of estimated state and local taxes for 2017 no later than Dec. 31, 2017, rather than on the 2018 due date. But don't prepay in 2017 a state income tax bill that will be imposed next year - Congress says such a prepayment won't be deductible in 2017. However, Congress only forbade prepayments for state income taxes, not property taxes, so a prepayment on or before Dec. 31, 2017, of a 2018 property tax installment is apparently OK. Note that the ability to pre-pay property tax varies because each town has different assessment and payment dates. You should contact your town office to discuss specifics, but in general most taxpayers should be able to pre-pay the property tax payment due in the spring of 2018.
Taxpayers who pay alternative minimum tax (AMT) in 2017 will not get a benefit from pre-paying their 2017 state income and local property taxes. We can help you determine if you are subject to AMT.
Of course this isn’t the only change that is taking place. We recently published information on our website that provides an overview of some of the key provisions of tax reform. If you’d like to learn more about tax reform please see the article, House and Senate Pass Agreement on Tax Reform, What to Expect , or contact us directly and we can review the new changes with you.
Macpage will also be hosting a Tax Reform Summary and Q&A event in January. Additional details on date and location will be forth coming. If you are interested in attending, please don’t hesitate to reach out so that we can make sure to you receive an invitation.
Benjamin Dailey, CPA , P rincipa l + Tax Specialist
207-523-3328 | direct