My plan for today’s post was a nice, detailed explanation of last minute tax tips: the things you can do to minimize your 2017 taxes, and some strategies to maximize deductions in 2017 that might not be available under the new tax law in 2018. The reality is a husband who needed time-consuming computer help late in the evening and a struggle to find the right words to explain all of this when I’m having a tough time just keeping my eyes open as I type. As a result, I’ll concentrate on one subject.
I’m going to tackle the question most often asked by my clients right now: whether or not to prepay property tax and state income taxes before the end of the year. The reason: the combined deduction of property taxes and state income taxes will be limited to $10,000 in 2018. The answer: it depends.
First, are you itemizing deductions in the first place? Check your 2016 income tax return. Do you have a Schedule A, Itemized Deductions, attached to it? If not, you did not itemize deductions in 2016. If things haven’t changed much for you (no huge swing in income, no chenge in property owned) there is a strong possibility you won’t itemize in 2017. Prepaying your property tax won’t help you. If you did itemize, but your tax deduction was well below the $10,000 cap, that would likely be the case agin 2017 if your income and expense situation didn’t change much between 2016 and 2017. Also, if your income was (and is) high enough that you paid the Alternative Minimum Tax (AMT), it means you weren’t able to deduct your income and property taxes last year and won’t be able to deduct them in 2017. Again, prepaying your property taxes won’t help you.
These issues can get a little complex. If you work with a professional tax preparer, it would be best to call that person today. Ask them to run a couple scenarios for you, based on your 2016 numbers and any differences you may have incurred in 2017. The best tax tips are the ones designed specifically for your situation.
To your better wealth,