Anticipated GOP Tax Plan

Anticipated GOP Tax Plan

With the anticipated passing of the GOP Tax Plan, we may have to do some year-end tax planning.

  • With the anticipated passing of the GOP Tax Plan, we may have to do some year-end tax planning to leverage against the new tax provisions. Since some deductions and credits may be limited or completely eliminated, you may want to look into the following :
  • Paying your January mortgage payments in December
  • Buying deductible items you may need next year now, such as protective clothing and uniforms, working shoes, professional books and journals, tools and instruments
  • If you are paying your property taxes on your own, do it now rather than waiting until January
  • You may want to accelerate your charitable giving, such as tithes and offerings to your churches or donating used clothes
  • If you anticipate owing state taxes next year, you may pay your estimated taxes in December rather than waiting for the deadline on January 15
  • LLCs or S Corps whose members and partners fall at higher tax bracket, may want to defer income by issuing invoices in 2018 rather than 2017

 

These are some of the highlights of the GOP Tax Plan:

It reduces many individual rates. Here is the guide of rates and income brackets:

  1. 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
  2. 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
  3. 22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
  4. 24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
  5. 32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
  6. 35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
  7. 37% (over $500,000; over $600,000 for couples)
  • It will almost double the standard deduction, but eliminates personal exemptions. It may be harder to itemize deductions, and taxpayers may not be able to get exemptions for dependent children
  • It will limit the deductions for state and local taxes up to $10,000 annually. Currently, deductions are unlimited
  • It doubles the Child Tax Credit for children under 17. It will be $2000 per child from the current $1000
  • It will cap deductions on interest on mortgage debt of $750,000 and completely eliminates deductibility of home equity loans
  • It will eliminate penalties for not buying health insurance

 

There could be host of winners and losers in this tax plan depending on individual circumstances. Proper tax planning therefore is of paramount importance  Please do not hesitate to call anytime or discuss  with us  these provisions during your annual tax preparation visit.