Tax Advice - Must take action before 12/31/2017 to get the benefits on your 2017 tax return

[Lavina Seadogs]

Hi all, 

Sorry I have yet again hijacked the team email. Although the House and Senate had passed the Trump Reform earlier this week, it wasn't officially in the law until Trump signs it today. 

Here are two items that I believe affects almost the majority of paddlers and their families on our teams. So feel free to forward the below advice to your firends and family as well. 

Trump Reform caps itemized deduction on state & local income taxes PLUS property taxes to $10,000 per tax return ($5,000 per return for married filing separately) beginning with 2018 tax return. 

How does this affect you? And what can you do?

1) High income earners filing multiple state returns --  Pay your 2017 income taxes now and get the deduction on your 2017 tax return. 

This is the scenario of people living in one state and working in another state (like ME!) or people who request for too little taxes being withheld from their paycheck during the year.  

Action 1: Pay your 2017 state and local income taxes in 2017 NOT at time of tax return filing. 

> Meaning - If you are one of those people who always end up owing taxes on your state return at time of filing, you need to determine NOW the amount you may owe at filing time for your 2017 tax return.  If you know how to complete a tax return, do a rough calculation on your own and round up the payment the next hundred or thousand dollar.  If you don't know how to complete your tax return and your income level was roughly the same as last year, then look back on your prior year's tax return, see how much you had to pay at time of filing and multiple that payment by 1.5 or 2.  

> Reasoning: Taxpayers get deduction for state and local income taxes on their tax returns in the year the money is paid.  As such, to be able to deduct the state and local taxes on your 2017 tax return, the taxes must be paid on or before 12/31/2017.  If you pay your 2017 taxes at time of return filing (in Jan to April of 2018), your deduction for the state and local income tax will be limited to $10,000 because that deduction belongs on your 2018 tax return.  

2) Action 2: Pay your 2018 property taxes in 2017

Homeowners - Pay your 2018 property taxes before 12/31/2017 and take the deduction on your 2017 tax return. 

While the Trump Reform has a fine print on NOT allowing taxpayers to pre-paid 2018 state & local income taxes in 2017, there is no rule against individuals pre-paying 2018 property taxes in 2017.  Reasoning there is no rule against pre-paying the real estate taxes is because the amount for 2018 property taxes is already assessed and determined.  The government knows how much they are expecting to collect from you for 2018. Whereas, the amount on your state and local income taxes is NOT assessable or determinable as they cannot foresee whether you could or would earn the same amount of income for next year.  

Why pre-pay your 2018 property taxes?  

If you and your spouse both work and you also own your residence, it is highly possible that your state and local incomes taxes PLUS your property taxes will exceed $10,000 in year 2018.  Trump's Reform has greatly reduced your itemized deductions on state and local income and property taxes.  As such, indirectly you are paying a higher percentage of taxes in 2018 through 2025.  There isn't much you can do about years 2019 to 2025 as the tax amounts are not yet assessed or determined, but you can at least do yourself a favor and take the appropriate advantage in 2017 when you still can. 

If you have further questions on the newly signed Trump Reform, please consult your accountant immediately.  The window to take the appropriate actions closes on 12/31/2017.  

I hope the above advice helps you and your families.  

Happy holidays and a happy new year to all!

Cheers!

Lavina

[Lavina Seadogs]

PS. Homeowners with mortgages - 

If your property taxes is lumped into your monthly mortgage payments, please consult your bank's mortgage consultant on how you could pre-pay the 2018 property taxes.  Please note that you have the rights to decouple the real estate taxes from your mortgage payment.  When you do that, you take back the control and responsibilties in having to pay your real estate taxes on a quarterly basis yourself.  At the same time, your monthly mortgage payment is lowered by the amount of propertly taxes. 

[Bobby Lee]

I appreciate the tip. Prepaying your property tax has been all over the news. Unfortunately, with the holidays and 4 effective business days left coupled with the volume of people trying to do this, it’s a Herculean effort to actually accomplish this. 

Fortunately, in NYC, the property tax year (for me at least) seems like it starts in the middle of the year. I was able to prepay up to June of 2018 without much fanfare on the NYC.gov website. 

I have scoured the web and have not found how to prepay the rest of my 2018 tax unless I call into the county clerks offices. 

If anyone has had success paying their full 2018 tax I would be interested in hearing how you did it. 

Merry Christmas everyone and have a Happy  New Year!!!

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[Lavina Seadogs]

You can do what a lot of people are doing,  go to the country clerk's office and prepaid the property tax in person.  

In NJ, it's city hall for the town that takes care of this. 

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[Nick C.]

Lavina,

I understand the qualifications for the AMT has changed.  Can you verify.  Also how will this affect those like myself that fall into this category?

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[nycaznmike]

According to the NYC.gov site:

http://www1.nyc.gov/site/finance/pay-now/pay.page

New Yorkers may pay their New York City property tax bills for the third and fourth quarters of tax year 2017/2018 before the due dates. Taxpayers should consult their tax advisor for guidance on the Federal tax treatment of their property tax payments.

however Online can only able to pay 1st and 2nd quarter.  

Looks like we have to make a trip to 66 John Street or your boro's payment center.

Michael 917-498-MIKE

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[Bobby Lee]

Hey mike, Q1 and Q2 of 2018 is the 3rd and 4th quarter payment. The cycle starts and ends in June.

But yes, you're right. If you're adamant, a trip to a government office in between holiday week. =)

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[Lavina Seadogs]

To all, 

Please note that the IRS has released an advisory yesterday stating that ONLY Q1 & Q2 of 2018 property taxes are deductible on 2017 tax returns.  Reason: Property taxes are assessed for year July 1st to June 30.  June 30 is the end of Q2.  As such, only Q1 & Q2 amounts are assessed by the government.  Your payments for Q3 & Q4 have not been assessed until late May, as such, the amount is considered undeterminable by the IRS.  When an amount is considered an estimate, the IRS would not allow you to take a deduction of the taxes on a prior year tax return. 

Here is the link to the IRS advisory. 

https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017

So now, you can all stop worrying about not able to pay Q3 & Q4 ahead of time.  If you were able to do it, you would still ONLY able to deduct Q1 & Q2 on your 2017 tax return.  You will not get a deduction on the 2017 for Q3 & Q4. 

I hope I am clear on this point. 

Lavina

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