The new tax act didn't leave a lot of time for interpretation or action. If you itemize your deductions and they total more than $12,000 (single) or $24,000 (married), you should seriously consider these four strategies. We know you only have a few days left in the year, but the savings could be worth thousands of dollars.
1. Pre-Pay Your Real Estate Taxes
- The administrative steps are involved and the strategy is not available in all areas. We’ve tried five different counties in Pennsylvania and found you cannot prepay because they do not have a warrant to collect for 2018. In Connecticut & New Jersey, clients reported that their municipality allows for prepayment of 6 months of real estate taxes. In New York, Gov. Cuomo issued an emergency order allowing property owners to prepay their 2018 school and property taxes so the levies can be deducted from this year’s Federal returns.
- If you are allowed to prepay your real estate taxes and you have a mortgage in which you escrow real estate taxes and insurance, be sure to obtain a receipt and provide it to your mortgage company. Your mortgage payments will stay the same for 2018. You will have to contact your lender in 2018 and ask for an escrow refund for the taxes you already paid.
2. Pay Your January 1st Mortgage Payment in 2017
- For most people, their taxes will be higher in 2017 than 2018. By paying one extra mortgage payment in 2017, you get to count the interest portion of your payment for 2017, allowing for a higher interest deduction this year.
3. Pay Your Estimated State Income Taxes Before Year-End
- This strategy has been relevant for many years. If you were planning on paying your estimated state income tax payment on January 16, 2018, you will likely want to pay this before year-end. The state income tax payment received in 2017 will be deductible. Many people will have a significant reduction of this benefit going forward.
4. Make a Charitable Contribution Before Year-End
- Again, most folks will be in a higher tax bracket in 2017. Not only will you be helping charity, you’ll likely get a higher tax benefit this year. If you were planning on making a charitable gift in 2018, make it now before year-end.
Congress didn't’t leave us a lot of time to implement these strategies, but we are here to help answer any questions specific to your situation.