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Tax Bill Passed - What it means to you
Friday, December 22, 2017

Congress officially passed the new tax bill.  Please remember - the new rules take effect next year, so we still have one more year with the old rules in effect.  

Below is a quick review of the tax bill and some general themes/action items which you might want to think about implementing.  

Things that can be done before year-end
  • Prepaying your local property taxes, to the extent that you can (some towns won't let you, but most will - you have to check with your individual town and mortgage company if you can do so)
  • If you make quarterly state tax payments, you should prepay the amount you owe for the last quarter (your 4th quarter payment) by the end of 2017.  You can't prepay for what you will owe in 2018, just so you know.
  • If you give to charity, you might want to consider "bunching" (aka giving your 2018 donations in 2017 so that you get a greater tax benefit from them).  
Deductions that are being changed/eliminated (not all inclusive - just highlights)
  • State and local income taxes being limited to $10,000 deduction
  • Mortgage interest limited to $750,000 mortgages (only for mortgages entered into after December 20th - old mortgages have $1MM balance limit)
  • Deductibility of financial planning and tax advice on Schedule A is eliminated
  • Alimony payments will no longer be deductible for people who enter into divorce agreements after December 31, 2018 (do not worry if you have an alimony agreement entered into before then - deductibility is still in effect for those agreements.  Therefore, recipients of alimony who have divorced after 12/31/2018 don't have to report it as income as well.
Other highlights/items that have been changed
  • Corporate tax rate reduced PERMANENTLY from 35% to 21%
  • Tax brackets have been lowered (reverts back to current law in 2026) 
  • The point where Alternative Minimum Tax (AMT) starts to affect taxpayers will be higher(reverts back to current law in 2026)
  • Standard deduction doubles; personal exemptions eliminated
  • Generally speaking, if you own a "pass-through" business (Schedule C, partnership, S Corporation) then you will receive a 20% deduction on your business income.  There are some income limits and other caveats to this though
  • Estate tax exemption has doubled to $11.2MM (reverts back to current law in 2026)
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