Trump Tax Plan: What You Need to Do Right Now


Well, they did it.  The Republicans (alone) passed the most comprehensive rewrite of the income tax code in thirty years (waiting on President Trump to sign into law).  With very little time left in this tax year, here are the things you should consider doing before year-end in order to take full advantage of the new rules:

  1. Get with your CPA/tax adviser now. Because of the nature and extensiveness of the changes, how you are affected will be highly personal.  Your tax advisor can review your personal facts and help you take maximum advantage of the new law.  My suggestion is to do a ‘trial’ tax return for 2017 and develop strategies for this year and next based on your specific information.
  2. Make your 2018 charitable donations in 2017. The new law raises the standard deduction from $12,700 to $24,000 (joint filers) and $6,350 to $12,000 (single filers).  This means far more people will use the standard deduction and not itemize deductions beginning in 2018.  If you’ll itemize this year but likely take the standard deduction going-forward, consider doubling-up on charitable gifts this year.  My favorite strategy is to open a donor advised fund which allows you to contribute now and receive a tax deduction this year but allows you to take your time distributing money to your preferred charities.  There is very little time left, but if you can transfer appreciated stocks versus cash, you’ll win two ways.
  3. Pay your fourth quarter state income tax estimate by December 31, 2017. If you pay quarterly tax estimates, you have until January 15th, 2018 to pay your last quarter estimate for 2017.  Beginning 2018, the federal deduction for state income taxes, local taxes and property taxes (all combined) will be limited to $10,000.  By paying your 2017 fourth quarter state estimate this year, you’ll ensure that you receive a full tax deduction.  And no, you can’t pre-pay your 2018 property taxes this year to capture the deduction you’ll lose next year.
  4. Max out retirement plan contributions. There is still time to max out your 401k and similar company retirement plan contributions for 2017.  The new tax plan still has seven tax brackets but reduces the tax rate which means most taxpayers will pay less taxes next year…making deductions this year more valuable.
  5. Postpone income/accelerate expenses for this year. This follows the same logic as item number three above.  If you are a small business owner, this could mean holding customer invoices until January 1, 2018 and/or prepaying 2018 business expenses before year-end.
  6. Make 2018 Tide Pride or Tigers Unlimited Foundation contributions now. For Alabama and Auburn fans who make donations to their favorite university and those donations are associated with season tickets, it appears the deductibility of those gifts will no longer be available beginning in 2018.
  7. Don’t die this year! If you are worth more than $5.5 million, tell family members not to ‘pull the plug’ on you this year!  Next year you can die with up to $11 million of net worth (versus $5.5 million this year) before your estate is subject to the death tax.

Tic Toc… time is fast running out on taking advantage of the new tax law for this year.  Because this is fast moving and is not yet law, be sure to consult with your own tax professional.