Given the passage of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), many taxpayers may wish to engage in last-minute tax planning prior to January 1, 2018. In fact, certain taxpayers may see significant and immediate benefits in doing so.
For taxpayers subject to state and local income taxes, a prepayment of future income tax liabilities can lead to an immediate 2017 deduction of all taxes paid. The Tax Act, beginning in 2018, will significantly curtail the state and local tax deduction.
Additionally, a taxpayer who currently itemizes deductions on the taxpayer’s personal tax return, but who may not meet the anticipated $24,000 standard deduction threshold (for a married couple) in 2018, may wish to accelerate any planned charitable contributions into 2017 to ensure a full deduction in 2017.
Additionally, other potential 2017 tax deductions, such as certain expenditures that constitute “Miscellaneous Business Expenses” and certain customer entertainment expenses, will be limited or phased out in 2018. Here too, prepayments may provide significant tax benefits.