The Financial Zen Education newsletter is being sent a day early because the new tax legislation will likely be signed into law on Friday. There are 3 things you need to do immediately before January 1st and 1 thing you probably don't need to worry about.
- Pay your 2nd 2017/2018 property tax now. The new law will cap the deduction you can take on state, local and property taxes to a maximum of $10,000 (that's combined, not each). So if your combined property taxes and state taxes will be more than $10,000 next year, then pay your property tax by December 31 to get the full deduction in 2017.
- Pay 4th quarter taxes. You are not allowed to prepay 2018 state taxes. It's written into the law. However, if you pay taxes quarterly (all you retirees and business owners), you CAN pay your Q4 2017 taxes. If you pay it by December 31, you can still deduct it.
- Defer income. The tax brackets will be lower. So any income you can delay until next year should be to your benefit. Ask if you can get your year-end bonus paid after January 1st. Don't take anything out of your IRA this month. Ask to get your RSU grants after January 1st.
- Mortgage interest deduction - It has changed, but it probably won't affect you. You can still deduct your mortgage interest on the first $1,000,000 if you closed your mortgage before December 15, 2017. You are grandfathered into the old law. However, if you close a new mortgage AFTER December 15, 2017 then you can only deduct interest on the first $750,000.
This is not intended to be comprehensive, but it's everything that I was able to research and think of since they finalized the bill last weekend.
Disclaimer: This blog is for educational purposes only and should not be considered financial, tax or legal advice. These statements have been simplified for illustration purposes. Consult your financial planner or tax advisor for help with your specific situation.