In a bit of a Christmas miracle, Congress last week passed the most significant tax reform since the Reagan administration. Without going into the details of the changes, I would like to bring to your attention a year-end tax tip that may save you some money.
Included in the tax reform is a $10,000 limit on how much taxpayers can deduct for state and local taxes. This change takes effect in 2018. Presently, there is no limit. This change will have the greatest impact on high wage earners in high income tax states such as California, Oregon, and New York. Seeing as there is now a limit on how large of a deduction can be realized next year, taxpayers are wisely wondering how much of their future state and local tax obligations can be paid this year.
It is my understanding future years’ state income taxes cannot be pre-paid this year; whether or not property taxes can be pre-paid is a gray area. Here in California it is believed that the 2nd 2017 property tax payment due on April 10, 2018 can be paid prior to year end, which would reduce a taxpayer’s taxable income by that amount. All taxpayers who itemize their deductions should consider doing so.
Please note that neither I nor GSR Capital Management are tax advisors; you should discuss your personal situation with your tax advisor prior to taking action.
I wish you an enjoyable holiday season!
Glenn S. Rank, CIMA® Certified Investment Management Analyst® President