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- Apr 14, 2006
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Assuming that beginning 1/1/18, state income taxes are no longer deductible on my federal taxes, I have been contemplating tax actions for the rest of the year. Among other things, I am thinking about making an estimated tax payment to my state for income taxes that will be due in 2018.
Assume for the sake of this question that my state taxes will be $8000 for 2018, that my paycheck withholding in 2018 will be about $$8000 and that I am in the 25% federal tax bracket. If I prepay $8000 before year end, can I deduct it on my 2017 federal tax return, thereby saving $2000 in federal tax? My ideal situation would be to make that payment and then rig my state W-4 so that I have no withholding in 2018 (I'm still employed full time). By the end of the year, I would be even steven. However, I'm not sure I could do that without making some misstatement on my state W-4. So, I would be willing to go ahead and make the prepayment of 2018 estimated taxes in 2017, suffer the withholding all year in 2018, and then recover the $8000 or so when I file in 2019.
Will this plan work?
Assume for the sake of this question that my state taxes will be $8000 for 2018, that my paycheck withholding in 2018 will be about $$8000 and that I am in the 25% federal tax bracket. If I prepay $8000 before year end, can I deduct it on my 2017 federal tax return, thereby saving $2000 in federal tax? My ideal situation would be to make that payment and then rig my state W-4 so that I have no withholding in 2018 (I'm still employed full time). By the end of the year, I would be even steven. However, I'm not sure I could do that without making some misstatement on my state W-4. So, I would be willing to go ahead and make the prepayment of 2018 estimated taxes in 2017, suffer the withholding all year in 2018, and then recover the $8000 or so when I file in 2019.
Will this plan work?