Moves due to tax bill passage

[misanman]

If we tried to pay property taxes early it wouldn't even get us up to the 2017 standard deduction. Feeling bad that I won't be able to take advantage of this gambit but also glad that we aren't in one of those high property tax / income tax states.

 

[RockyMtn]

Paid second half of 2017 property taxes that were not due till next March. Paid 4th qtr 2017 estimated state taxes not due until April of next year. Paid two years of vehicle registration and ownership tax due in January. Made DAF contribution.

 

[Mango1956]

I'm not doing anything, because I never have enough deductions to itemize now that I am retired, mortgage free, in a low SALT state, and with what I regard as low taxes already (7% of my AGI last year). I finally dared to try the calculators for the old vs new taxes. It looks like in my case, my taxes under the new rules will be even lower than that, without doing anything at all, bringing them down to about 5% of AGI. But, we'll see. Anyway, any further reduction is almost venturing into the trivial, and it hardly seems worth the effort to lower my taxes further.

Sure makes life simple for me. Wishing you all some productive tax planning this week and next.

+2

 

[gayl]

IIRC for either feds or state, the extra money is considered to be an overpayment and the taxpayer has the option (at filing time) of receiving a refund or applying it to the next year's taxes. So (IANAL) the overpayment is not considered by the recipient to be a payment of future taxes at the time the taxpayer submits the estimated tax payment. The taxpayer makes that election at filing time in the following year and directs the recipient accordingly. IOW, we're screwed.

Also don't the new regs come into play next year (basically 2 weeks) so these would be last ditch efforts to play by expiring rules?

 

[Which Roger]

with the new SD I won't itemize in the future. My prop tax = 3k + FTB = 5k .... trying to figure out how to do just the 1040A from now on. So 2017 = prop tax 4.5 (3 pymts) + 5k. I read you can pay prop taxes already billed as in past years just not prepay in income taxes

I read the same thing today: You can prepay and deduct property taxes but not state and local taxes.

I'm prepaying property taxes and doubling up on charitable contributions this year because with the higher SD starting in 2018, I will likely never again be itemizing.

 

[OldShooter]

... these would be last ditch efforts to play by expiring rules?

Yup.

 

[harley]

I read that there is an IRS opinion that this won't work.

Reference? I haven't heard that. I own three (count 'em) houses and was planning to pay at least part of next year's taxes on all three.


Edit: Or I would have if any of them had been billed yet. Nothing to pay, so that's one dodge down.

 

[harley]

Here's a quick video/article I found on the topic: Tax moves to make before 2018 - Video - Personal Finance

They completely missed the concept of future contributions not being deductible due to the lack of itemizing and only focused on the difference in tax rates for the charitable contributions. No mention of DAFs. Of course, the entire thing was only 1:18 long, so maybe I was expecting too much.

 

[OldShooter]

Reference? I haven't heard that. I own three (count 'em) houses and was planning to pay at least part of next year's taxes on all three.

Read my subsequent posts. I read a CNBC article that had an error in it. I have $10K of property tax prepayments sitting here on my desk ready to go.

 

[Trooper]

I'm not doing anything, because I never have enough deductions to itemize now that I am retired, mortgage free, in a low SALT state, and with what I regard as low taxes already

How about medical expenses (premiums, deductibles and co-pays)? We also purchase LTC and those premiums are deductible. Of course, there is a floor of 10% of AGI before deductability can occur.

We are prepaying January's estimated state taxes.

 

[harley]

Read my subsequent posts. I read a CNBC article that had an error in it. I have $10K of property tax prepayments sitting here on my desk ready to go.

For some reason the whole page didn't load, so I didn't see your subsequent posts. Sorry.

So, those of you that are pre-paying, are you just paying an estimated amount based on this year's bill? Or do your counties show what is due next year? Because mine don't.

 

[Another Reader]

Paid off one draw on the HELOC. Arguable that it was used for rental expenses, but the rate is now variable and is now over 5 percent.

Paid the second installment of my California property taxes.

Estimated the 2017 state income tax and paid the difference between what was withheld and what I think I will owe.

That's about all I can think of. Even if a sinkhole swallows Washington and the bill is never signed, no big deal.

ETA: Property taxes on the rentals are business expenses and continue to be deductible as such. No prepayment needed.

 

[Sunset]

We are donating more heavily than normal.
Planning to do a bigger Roth conversion next year due to the lower brackets below 25%.
Looking forward to using the SD every year, vs every second year, as honestly it was a pain to skip itemizable expenses every other year, and the net effect was pretty small as we have no mortgage.

I am a bit OCD, in that I will go through many steps/clicks/tracking, etc to save $100 off my tax bill, so the bigger SD solves that for me.

 

[friar1610]

Transferring appreciated ETF shares to my alma mater. I'll get a 2017 tax deduction. But the college will internally apply half to my 2018 and half to my 2019 pledge. (I had already made my 2017 contribution.)

Edited to add: With new tax law I won't be itemizing going forward.

 

[W2R]

How about medical expenses (premiums, deductibles and co-pays)? We also purchase LTC and those premiums are deductible. Of course, there is a floor of 10% of AGI before deductability can occur.

We are prepaying January's estimated state taxes.

I don't have enough to deduct! I have no deductibles or co-pays with Medicare and my insurance, and premiums for both are small. My state taxes last year were a whopping $667 for the whole year. I do have quarterly estimates automatically deducted from my checking account, to make sure I don't forget to pay them. So anyway, my estimated tax payment for January is just $170, not enough to push my deductions up high enough to itemize. I did my own taxes for 50+ years before I started using TurboTax, and so I am aware that if deductions are not high enough you shouldn't use Schedule A and that is the basis for my decision not to itemize. Right now 10% of my AGI is a whole lot higher than what all possible deductions would add up to.

Just a different tax situation than some have, I guess.

 

[Golden sunsets]

I read that there is an IRS opinion that this won't work.

Where did you read this? Everything I have read so far relates to state income taxes only. If your municipality accepts RE taxes paid in advance you can pay up to 12 months in advance per IRS code. I have had two conversations with my CPA on this point in the last two weeks, one before the reconciliation bill and one after. I’ve confirmed with my Town that they will accept payments in advance and have arranged to pay a full year in advance on 12/28 of this year.

 

[Golden sunsets]

How about medical expenses (premiums, deductibles and co-pays)? We also purchase LTC and those premiums are deductible. Of course, there is a floor of 10% of AGI before deductability can occur.



We are prepaying January's estimated state taxes.

Law has changed to reduce the rate to 7.5% od AGI for 2017 and 2018, so a big help for this year if you itemize.

 

[Senator]

So for example, say a taxpayer's state tax bill is usually $4,000 a year and they make 4 $1,000 estimated payments but the actual tax ends up being $3,500. The $500 excess is simply estimated error and legitimately deductible in 2017 and is income in 2018.

OTOH, if under the same fact the taxpayer made a $5,000 estimated payment in December, then at least $4,000 would be disallowed because it was prepayment of 2018 taxes.

I am not saying to do this, but after it is all said and done, the difference in taxes that are owned is going to be negligible in the IRS eyes.

A $4,000 state tax deduction, taken this year, or next, will likely be less than a $500 difference in the amount of taxes owed by the taxpayer. If you pay it this year, you cannot take it next year. The overage this year will be income next year.

The IRS will be looking for larger fish to fry, unless it comes in on a W2, K1, 1099 or some other electronic verification. If it comes in on those types of forms, even 0.01 will be scrutinized.

 

[Luck_Club]

Just sent a 2 checks to the town, hope they cash them.

 

[MarieIG]

Well I have alway paid my whole property tax bills when they came in. I just did so in November. I also have always paid extra (state and federal) income tax and just rolled it over to the following year. It won't help me though. My deductions (which have come from SALT) have been eaten away by the AMT. Next year since the deductions will be so small, the ATM should not apply since I will be paying more taxes in any event.

 

[Gumby]

Prepaid my 2018 church pledge in full. Paid my January installment of property tax in December (which I have always done anyway). I won't be itemizing next year.

 

[SecondCor521]

Due to the new tax bill, next Tuesday or Wednesday (i.e., after the Christmas hubbub):

I'm going to help my Dad make an estimated state income tax payment for his probable liability for TY2017 since he will be able to itemize for 2017 but not for 2018 and his tax bracket will drop.

I'm going to carefully estimate my AGI and do a Roth conversion up to close to the FAFSA auto zero EFC AGI limit because I have a junior in high school who will be completing the FAFSA next October 1st using my 2017 tax information.(*)

Other year end things I'm doing that I was planning to do anyway:

I'm going to help my Dad make a distribution from a marital bypass / credit shelter trust to himself because the tax rates for trust income is higher than for single taxpayers.

(*) As discussed elsewhere, I was planning to Roth convert to that limit anyway, it is just the precision AGI estimation and staying below the cliff parts that are new. If the tax bill had not passed, I would have overconverted by a lot and then recharacterized once I got all my tax information.

 

[Scuba]

interest on mortgages & HELOC for acquisition & improvements will be deductible on 750k of loan. Interest on HELOC for debt consolidation won't be

Not according to an article I read as well as my CPA. Interest on a HELOC is unfortunately no longer deductible regardless of whether total mortgage debt is below the $750K threshold.

If you have a different authoritative source, please share. Thanks.

 

[Scuba]

Not according to an article I read as well as my CPA. Interest on a HELOC is unfortunately no longer deductible regardless of whether total mortgage debt is below the $750K threshold.

If you have a different authoritative source, please share. Thanks.

Actually I just googled it and found another article that said interest on HELOC’s up to $100K will still be deductible as long as funds were used for home improvement. I sent the link to my CPA and asked him to confirm.

 

[Scuba]

Can you give me a little detail on this please? I was planning to apply and take out a HELOC in 2018. I hadn't heard of anything in the tax bill that affects the deduction of the interest on HELOCs, but it feels like information overload any time I look at news stories on the tax legislation.

I’m not clear now because I read conflicting information, but the latest article I read said that interest on a HELOC balance of up to $100K will still be deductible if funds were used for home improvement. I’m asking my CPA to confirm.