As I’m sure you’re well aware, major tax reform is due to pass soon. In preparation for this we’ve been busy diving deep into the new tax code to try and take advantage of any opportunities for taxes savings that we can.
Depending on your tax status (i.e. whether or not you are in alternative minimum tax aka “AMT” – your accountant or an LFA Advisor can confirm this), there may be huge savings by simply being proactive.
– If you are not in AMT:
– Prepay as much of your 2018 real estate tax as possible (most municipalities allow 50% of 2018 tax due, others allow more/less).
– MATH: If someone in the 35% tax bracket prepaid $15k of 2018 RE taxes, this could save them roughly $5k.
– Prepay 2017 state taxes before 12/31/2017 – your CFP or CPA can tell you if this makes sense based on your 2017 tax projection.
– If in AMT:
– Don’t prepay any 2018 real estate taxes or 2017 NY/NJ state taxes, but potentially consider increasing your charitable gifts.
– Charitable Gifts:
– Whether you are in AMT or not, charitable gifting could be a huge savings in 2017. If your Advisor tells you that you’ll be taking the new standard deduction in 2018, it would be prudent to frontload/pre-fund your charitable gifts in 2017 (i.e. donate to a Donor Advised Fund and/or make your 2018/2019/2020 charitable donations now).
– WHY THIS MATTERS: If you are no longer itemizing your taxes in 2018 (most people will not itemize), you may have to donate exorbitant amounts of money in order to begin seeing a financial benefit.
– While we don’t make charitable contributions solely for the financial benefit, it’s a nice perk. If you’d like to maximize this perk, 2017 is the year to do it.
We wish everyone a healthy & happy holiday. Please do not hesitate to reach out to LFA with any questions.