Accelerating Deductions for the Tax Bill by John NowakSubmitted by Moller Financial Services on December 18th, 2017
The tax bill (aka Tax Cuts and Jobs Act) compromise version, where the House and Senate agree, has been finalized. Congress is expected to pass the bill and send it to the president to be signed into law. As a result of this new law, there are three actions taxpayers should consider before December 31st.
- Accelerate 2018 charitable contributions into 2017.
- Make estimated state income tax payments for 2017 income in 2017, not 2018 (note: prepayments of 2018 income tax is prohibited).
- Accelerate property tax payments into 2017.
To make a prepayment for property taxes, you will need to contact your county directly to get instructions. Below are links to instructions for the surrounding counties of Chicago.
- Cook https://www.cookcountytreasurer.com/prepayment.aspx
- Only the first installment due in March is allowed to be prepaid.
- Lake https://www.lakecountyil.gov/539/Pre-Payments
- DuPage https://www.dupageco.org/Treasurer/1831/
- McHenry https://www.co.mchenry.il.us/county-government/departments-j-z/treasurer/advance-tax
- Will http://www.willcountytreasurer.com/2012/07/weber-launches-new-property-tax-pre-payment-program/
If you pay property taxes with your mortgage escrow, contact your bank to see if they can prepay using escrow funds. For example in the case of Wells Fargo and Cook County, the bank could only make a prepayment if the due date was within 60 days. Since the Cook County bill is due March 1st, the prepayment must be made with personal funds outside of escrow. Wells Fargo will not double pay the March property tax bill. Therefore, they will refund the overpaid escrow balance later next year.
There are two reasons for accelerating deductions into 2017.
- The property and state tax deduction will be capped at $10,000 going forward, thereby reducing itemized deductions in the future.
- The standard deduction is increasing from $6,350 to $12,000 for individuals and from $12,700 to 24,000 for joint taxpayers. With these higher standard deductions, fewer people will itemize their deductions.
To be clear, NOT EVERYONE WILL BENEFIT FROM THESE ACTIONS. For example, taxpayers subject to Alternative Minimum Tax (AMT) do not get to deduct state income or property taxes. Taxpayers with lower taxable income in 2017 may not benefit from greater deductions. To be safe, it is a good idea to check with your financial planner and/or CPA before making these last-minute payments/deductions.