Planning for New Tax Law
Now that Congress has approved the new tax law, beginning in 2018, deductions for real estate and state and local income taxes will be limited to a combined total of $10,000. As a result, taxpayers should consider paying certain taxes in December 2017, instead of waiting until 2018, when the new limit will be in effect.
To the extent that a taxpayer pays the 4th quarter 2017 installment of estimated income taxes due to a state in December of 2017, the taxpayer might benefit from deducting the payment on the taxpayer’s 2017 federal income tax return.
Similarly, a taxpayer may also benefit from paying real estate taxes in December 2017, if those taxes were assessed and billed in 2017. (Such assessments often provide the taxpayer with the option of waiting until 2018 to pay some portion of the tax.)
The benefit of any such December 2017 payments may be reduced or eliminated, if a taxpayer is subject to the alternative minimum tax in 2017, since deductions for these taxes are added back to the taxpayer’s income for the purpose of computing the alternative minimum tax.