Dear hard-working readers,
If you are reading this, then you have access to the internet. And if you have access to the internet, then by now you know that the US Congress passed a sweeping tax overhaul last week.
The Tax Cuts Act– or the Trump tax plan if you prefer – is far-reaching, and will have major implications for American businesses, families, and individuals. Like any landmark piece of legislation, it will take time until we know the full implications of the complex law. I am sure you are trying to figure out what it means for you.
But fear not, dear readers! There are important changes that you should know about, and I am here to make sure that you are aware of what they mean for you, your loved ones, and your business.
Child Tax Credit
The child tax credit for the 2017 tax year will be the same as it was for the 2016 tax year. If you have children who turned 17 in 2017, they will no longer qualify. If you have children born in 2017 (a hearty mazal tov to you), be sure to request the social security card promptly so that they will qualify. Remember – the social security number must be issued before the tax return deadline in order to qualify for the refund for that year.
For 2018, the final provisions of the child tax credit appear to be finalized, at long last. The total credit will increase to $2,000 per child, of which $1,400 will be refundable. Yes, that is quite an increase! In addition, the phase-out thresholds will increase to $200,000 for single filers and $400,000 for married filing jointly. This means that taxpayers with higher incomes will qualify for this benefit.
While we are still carefully reviewing the final version of the 1,000-page tax bill, I’d like to highlight two areas of tax planning before the end of 2017. Keep in mind that these tips are only relevant if you take itemized deduction (most filers living overseas take standard deduction and use Foreign Tax Credit or Foreign Earned Income Exclusion to remove tax due).
1. Give Charity
You don’t need a tax expert to tell you about the importance of giving tzedakah, or charity. But beyond the performance of a mitzvah, the help you provide others, and the good feeling that giving provides, there could be an added incentive to give charity before the end of this year. Given the upcoming tax changes, many individuals who take the itemized deduction in 2017 will start to take the higher standard deduction in 2018. As such, 2017 could be the last year for many people to have a tax benefit from charitable contributions.
2. Do Not Delay Paying State and City Taxes past 31-December
The new state and local income tax deduction is capped at $10,000.
Previously, the deduction was unlimited. As a result, many individuals who have high state and local taxes will not receive the full benefit of deduction starting in 2018. Individuals who currently benefit from this deduction should be sure to make their 2017 fourth quarter estimated tax payment (typically paid 15-January) before 31-December. Additionally, anyone that expects State and City tax to be due in 2017 should make payment before the end of the year so they can include as itemized deduction in 2017.
I hope this has been informative and helpful. You work hard to provide for yourself and your family, and you deserve to be aware of all deductions and support for which you are legally eligible. Taxes can be complex and daunting, so it is important to turn to a professional to provide some peace of mind and get money back into your pocket.
So until next time, my industrious friends, enjoy the new year, keep working hard, and check back in next month!
The Mandatory Disclaimer
Any tax advice herein is based on the facts provided to us and on current tax law including judicial and administrative interpretation. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. Should the facts provided to us be incorrect or incomplete or should the law or its interpretation change, our advice may be inappropriate. We are not responsible for updating our advice for changes in law or interpretation after the date hereof.