With all of the proposed changes to the income tax code in 2018, the one that will affect the most individuals will be the doubling of the standard deduction to $12,200 for single taxpayers and $24,400 for those filing married joint. The implication of this is that a lot of individuals who could itemize in 2017 will not be able or need to itemize in 2018. The implication is that taxpayers should try to move as much of their deductions as possible into the 2017 income tax year.
MOVING ITEMIZED DEDUCTIONS INTO 2017
1) Cash donations are based on when the check is written or when it is charged to a credit card. Consider moving some or all of what you planned on giving in 2018 by writing a check and mailing by 12/31/17 or charging to your card by 12/31 (provided you are going to pay off the card in short order)
2) Clean out your closet or garage; If you have gently used items, giving them to someone in need will help others without spending anything at all. For parents, it’s an easy way to pass along toys or clothes that your children quickly got tired of or simply outgrew. When you do this, make sure to keep an itemized list of what you donate. This will allow you to maximize the value of your deduction
Mortgage Deduction and Taxes
1) Make your January mortgage payment in December so as to get credit for the accumulated mortgage interest in 2017
2) If your county allows it and you do not pay your taxes from an escrow, consider pre-paying your May 2018 real estate taxes due
3) If you believe you are going to owe the state in 2017, make an estimated payment before 12/31
MOVING INCOME INTO 2018
The other primary change is the proposed income tax rates will be lower. Therefore, if you have the ability to defer income into the 2018 tax year it would be beneficial to do so.
1) Deferring income is obviously easier if you are self-employed. You can defer invoicing clients or ask them to delay paying. Remember, the taxable year is based on when you receive the check, not when you cash it
2) If you are receiving a bonus or commission at year-end, ask your employer to delay the payment until 2018
3) If you are taking any withdrawals from retirement accounts in December, delay until January