Year End Tax Planning 2017 – Utilizing State and Local Tax Deductions While You Still Can
Posted: November 21, 2017
The new tax reform bills recently proposed by the House and the Senate include substantial changes to the rules that govern the deductibility of State and Local Taxes (often abbreviated as “SALT” deductions) for Federal income tax purposes.
Under current law, if you itemize deductions you can deduct the state and local taxes you paid during the year on your federal income tax return. This includes state and local income taxes (or sales tax) and property taxes paid throughout the year.
The recent House bill eliminates all SALT deductions other than deductions for property taxes, which are capped at $10,000. The Senate version of the tax reform bill goes even further and eliminates all SALT deductions.
Both proposals would take effect in 2018. Therefore, it may be beneficial to maximize your SALT deductions before the end of 2017 by paying any remaining 2017 estimated state income taxes before the end of the year. It may also be beneficial to pay 2017 property taxes before the end of the year.
Keep in mind that accelerating the payment of state or local taxes could increase alternative minimum taxes. Your tax advisor should therefore be consulted before deciding whether to maximize your SALT deduction in 2017.
Please let us know if you have any questions or would like our assistance with any of the matters discussed in this post. We would welcome the opportunity to be of assistance.