With President Trump signing the new tax bill last week, and as more information is made available about the changes in tax law, we want to let people know about some last minute tax strategies to implement before December 31, 2017 to be in a better position for 2018. We talked about a few strategies in our blog last week, but we would like to bring up a few more.
Charitable contributions are an item that become a little tricky in the new tax bill. With many itemized deductions getting the axe in the new bill, coupled with a larger standard deduction for married-filing jointly taxpayers ($24,000 after 2017), it may benefit to lump two years worth of charitable contributions into one year to help reach that standard deduction dollar amount a little easier.
The “Obamacare individual tax mandate” penalty for not having qualified health coverage has been removed for 2018. Individuals will not be slapped with a penalty for not having health coverage.
The child tax credit has been amended to include taxpayers who have been not been eligible in previous years based on their income. The range to be excluded now has gone up to $400,000 of your adjusted gross income(AGI), or $200,000 for single filers. To qualify, dependents need to be under the age of 17 at year’s end, and the credit is $2,000 per qualified child.
With the increase in standard deductions across the board ($24,000 for joint filers, $18,000 for head of household filers, and $12,000 for single filers), it makes it all the more important to plan more carefully because of the changes to itemized deductions. As mentioned above, it may be beneficial to take advantage of the standard deduction every other year by combining two year’s worth of contributions into one year.
For those dealing with a divorce or separation, alimony payments used to be allowed for a deduction for the payor and income for the payee. Under the new law, that will not be the case, effective for any divorce or separation agreement executed after 2017. If possible, it would be beneficial to try to finalize agreements before December 31, 2017 to get the benefits of the current rules.
For a business that wants to take their clients out for a meal or to a game, currently they can deduct 50% of the cost for entertainment purposes. But, after December 31, 2017, that deduction for those expenses are going away.
Under the new law, qualified education expenses for 529 plans have been expanded to include elementary or secondary public, private, or religious schools up to $10,000 per year.
As time goes on, we will all become accustomed to the new tax law and we will find benefits, but these tips may come in handy for those who are looking to get some final benefits out of the current tax law. If you have any questions, please contact BWTP at 314.576.1350.