Year-End Tax Changes
I haven’t read the new tax law yet but I suspect very few of those who voted on it have either. However I have read summaries from nearly a dozen reputable sources and do have a couple thoughts to share.
The change likely to affect the greatest number of people is the near doubling of the standard deduction: the amount of income “not counted” before you owe taxes on the remainder. This increase to $12K for single filers and $24K for joint filers is good news for those who haven’t previously been able to itemize due to low tax, interest and medical expenses. You may have read about the $10,000 cap on local income, sales and property tax deductions. It’s generally only relevant in high-tax locales like NY, NJ and CA – another advantage of living in one of the flyover states.
If you expect to itemize your 2017 taxes (due in 2018), it might be a good idea to prepay any significant charitable gifts and, possibly your property taxes, this year. You have just two days to accomplish this so check with your advisors and County Treasurer to see if it makes sense to hurry. If you live in Bartholomew County, the Treasurer’s office is accepting payments Thursday and Friday.
There’s been a lot of concern in the non-profit community about whether or not people will continue to donate now that contributions are less likely to be deductible (due to the increased standard deduction). It’s my understanding that people generally support causes that are important to them. The loss of potential deductibility, while it may deter a few givers, is unlikely to be determinative for most.
Small business owners may be heartened by the reduction in business taxes although there are limits on the applicability for smaller personal service firms. If you’re wondering about the impact of the new law on your taxes, the New York Times has published a calculator that estimates how you’ll fare. Here’s a link to it for your consideration.
I continue to ponder why we as voters continue hiring employees, a/k/a our Congressional representatives, who refuse to work together. They regularly wind up delaying important legislation until the last minute so there’s little time for the rest of us to react. Nonetheless, WWA will be open all day Thursday and Friday if you need someone to help review your options. As always, we’re here to help.