Top 10 Ideas of Tax Actions to Take by December 31, 2017

By Barbara Coats, Principal

December 21, 2017

The Tax Cuts and Jobs Act is anticipated to be signed into law by President Trump soon, with new tax provisions coming into effect in 2018.  With the tax law changing, below is a list of ideas that you should consider taking before December 31, 2017 to maximize your tax savings.

Idea #1 – Traditional Tax Planning – Defer Income and Accelerate Deductions
Tax rates for businesses and individuals are decreasing in 2018.  Deferral of income from 2017 to 2018 should provide tax benefits.  Similarly, acceleration of deductions into 2017 should be beneficial.
Idea #2 – Pay 2017 State Income Tax Before Year End
In 2018, the new tax law limits the deduction for state and local taxes to $10,000.  If you itemize and do not pay AMT, you should consider payment of the remaining balance of your 2017 state income tax liability by December 31.  Doing so will provide federal and state tax benefits.  If you itemize and do pay AMT, you should also consider payment of your 2017 state taxes by December 31 because you can still receive a state tax benefit.  Note, you cannot claim a 2017 tax deduction for prepayment of 2018 state income tax.
Idea #3 – Pay Real Estate Taxes
If you currently owe real estate taxes, consider payment of the amount owed by December 31.  Beginning in 2018, there is a $10,000 deduction limit for the combination of state income tax, sales tax and real estate tax.
Idea #4 – Maximizing Charitable Contributions
The new tax law nearly doubles the standard deduction, to $24,000 for married couples, $18,000 for heads of households and $12,000 for singles. This change will cause more taxpayers to take the standard deduction and forego itemizing deductions.  If this applies to your situation, you should consider accelerating charitable contributions into 2017.
Since the tax rates will decrease in 2018, the tax benefits of charitable deductions are likely higher in 2017 than they will be in 2018.  You should consider prepayment of charitable contributions. or the creation of a donor advised fund.
Idea #5 – Charitable Donations to College Athletic Seat Rights
Many college and universities require payment of a charitable donation to qualify for the purchase of football and basketball tickets.  In 2017, 80 percent of these donations are deductible.  These donations will not be deductible beginning in 2018.  If you make these donations, consider payment of future required donations in 2017.
Idea #6 – Payment of Miscellaneous Itemized Deductions
For 2017, miscellaneous itemized deductions, such as tax return preparation fees, investment management fees, and employee business expenses, are deductible to the extent they exceed 2 percent of adjusted gross income (AGI).  For 2018, these deductions disappear.  You should consider paying these items by December 31 if the expenses are likely to exceed 2 percent of AGI.
Idea #7 – Make Reservation for 2018 Georgia Education Expense Tax Credit
Ten states offer tax credits in exchange for contributions to qualified private school scholarship programs.  Using these tax credits provides the opportunity to swap 2018 non-deductible state income tax for deductible charitable contributions.  Reservations for 2018 Georgia credits must be made in December 2017.  For Georgia taxpayers, the most popular programs are the Georgia GOAL Scholarship Program, Apogee, and Grace Scholars.  We understand that the deadline for the deadline for the Apogee program has passed, but Georgia GOAL and Grace Scholars are still accepting reservations.
Idea #8 – Paying Business Entertainment Expenses in 2017
In 2017, 50 percent of business entertainment expenses are tax deductible.  Beginning in 2018, none of these expenses will be deductible.  You should consider payment of business entertainment costs in 2017 rather than 2018.
Idea #9 – Increasing Net Operating Losses into 2017
In 2017, taxpayers with net operating losses (NOL) can carry their losses back 2 years and forward 20 years.  Beginning in 2018, NOLs can no longer be carried back.  Taxpayers with NOLs should maximize 2017 NOLs if the opportunity to carry the loss back is desired.
Idea #10 – Avoid Making Taxable Gifts in 2017
Beginning in 2018, the estate and gift tax exemption will double.  Individuals who are considering making gifts which would cause 2017 gift tax should delay these gifts to 2018 to take advantage of the increased exemption.

We offer these ideas as general guidance.  Please consult your Windham Brannon tax advisor to receive specific advice about your taxes.