How to Prepare if Congress Passes a New Tax Reform Law

Let Stevens Pierce & Associates Help You with Your Tax Planning

At Stevens Pierce & Associates, CPAs, our goal is to help you take control of your taxes and to save you money. Congress is currently working on a tax reform plan that could have major repercussions on the amount you will pay in taxes. Now more than ever, it is important to tax plan. Tax planning helps to decrease your tax liability, or how much you will need to pay in taxes. With smart tax planning, you may save a significant amount of money. Tax planning is even more important now that major tax reform legislation will be passed. Our CPAs are here to help you save as much money as possible in taxes.

Of course, the tax reform bill may not pass, but this blog post is designed to help keep you prepared in case it does, so that you don’t face significant tax increases in 2018.

The Main Idea

In short, you want to make sure that you defer any additional income until next year, and that you take advantage of deductions this year while you still can. This is because tax rates may decrease next year, and many popular deductions may be eliminated.

Decreased Tax Rates

If this bill passes, individuals will enjoy lower tax rates. Businesses may also be paying less in taxes. So, if you are expecting any extra end-of-year income, you should try to defer it to the beginning of next year. That way, that extra income will be taxed less than it would be this year. So ask your boss if you can receive that Christmas bonus after New Year’s, wait until January to work on decreasing your debt (make it your New Year’s resolution!), or if you own a business, don’t bill your clients until 2018.

Goodbye Deductions…

The new tax bill will get rid of or decrease many deductions, although there will be an increased standard deduction.

Popular deductions that will be eliminated include nonbusiness for state and local income, real estate tax and sales tax (instead, you will be allowed an up to $10,00 real estate tax deductible). Therefore, it might be a good idea to ask your employer to increase the state and local income taxes taken out of your paycheck until the end of the year, so that they will be deductible in 2017. For the same reason, you should also try to pay the rest of your state and local taxes for this year by the end of the year, as well as pay ahead on your real estate taxes.

If you contribute to charity, consider making your donations before the end of this year, because the deduction for charitable contributions could disappear come 2018. In addition, the reform might get rid of medical expense deductions, so try to get any needed medical procedures or services done before the end of this year, so you can receive your deduction.

Although the tax reform may eliminate the estate tax, this is uncertain, and it is uncertain how it will affect clients. Therefore it isn’t recommended you take any action on it at this point.

Our experienced accountants are here to help you, so please contact us at 208-734-8662 if you have any questions, or to schedule an appointment! Let us help you navigate the proposed tax reform laws so you can best prepare yourself or your business in case it passes.