Dear Friends and Clients of ZWM,
With the recent reconciliation of the “Tax Cuts and Jobs Act,” there are some significant changes and a few opportunities we wanted to make you aware of. Most of our clients will pay less in taxes overall, but there are many nuances. While this notice is not meant to analyze every attribute of the legislation, we wanted to outline a few strategies for you to employ before the tax system undergoes this transformation at the end of this year.
Of course, please consult with your tax professional for advice on how this all impacts you.
A major change of this bill for individuals is the new $10,000 limitation on combined state and local income tax and property tax deductions (SALT). As a reminder, the current system allows you to itemize these expenses on Schedule A to reduce your taxable income. The new $10,000 SALT cap will have the effect of raising income taxes for many people. However, with these deductions being capped in 2018 and going forward, there is an opportunity for this year: prepay your January 2018 state quarterly income tax estimates before the end of 2017. Doing so will help you maximize your standard deduction this year before the deductibility of state and local taxes becomes restricted in 2018. You can accomplish this strategy in the same manner as you would normally make quarterly payments; you would jut do so earlier, and in this tax year before December 31st. Of course if you do not itemize your deductions, then this will not impact you, and you will pay lower taxes because of the increased standard deduction.
The other major deduction slated for modification is the deductibility of property taxes. Now, there is no maximum amount in property taxes that you may deduct on Schedule A. Beginning in 2018, this item will be included in the combined SALT limitation of $10,000 per year, for both individuals and married taxpayers who elect to itemize rather than take the new increased standard deduction. However, there is a similar opportunity as with state and local income taxes, in that you may prepay next year’s local property taxes.
To prepay property taxes, there is a procedure where one must request being put on the prepayment list, then wait for acknowledgement of this before paying. You may click on your respective county to prepay your property taxes online:
- Cook County:Cook County is now set up to receive your first installment. See the website. You can send it in, or walk into any Chase Bank to pay.
- Lake County: there is no pre-registration link, but you can mark envelope and check as “prepayment.” Lake County accepts checks for pre-payment up until 5pm, December 29th. You can either mail a check or bring it in to their office. A post-mark by 12/29 does not cut it…it must be at the office by the 29th.
- Dupage County
- For our many clients who have properties elsewhere, please contact us for details on how to prepay for your local taxing entity. Or, if your county is not listed, search the county’s website or call and ask about property tax pre-payment.
While the legislation has many other changes and potential impacts on the economy, these are some opportunities for you to maximize your individual deductions under the old system before year-end. As always, please let us know if you have any questions.
As per above, and as you may have read, many deductions are now eliminated for many filers. More of our clients will be claiming the to be increased standard deduction. If you have been itemizing your deductions, you may want to consider making your 2018 charitable donations now, instead of next year. They may qualify for a deduction this year, but the standard deduction might be better for you next year. More on this strategy next year.
Another interesting change is the ability to use 529 College Savings accounts for K-12 private school expenses. Once again, more on this next year, and as you move through the planning cycle with us.
That is about it for now. Enjoy your holidays!