1) Prepay Your 2018 Property Taxes
In 2017 you can deduct all your local property taxes from your federal income tax bill, but starting Jan. 1, there’s a $10,000 limit. Prepaying your 2018 bill now, before December 31, 2017, will allow you to take that full deduction before the rules change.
Governor Andrew M. Cuomo has signed an emergency Executive Order that will allow New Yorkers to prepay next year’s 2018 property taxes this year, before the new tax law takes effect. Payments must be postmarked by December 31, 2017. . If your county accepts online payments, you may pay online until 11:59 p.m., Sunday, December 31, 2017.
2) Give More to Charity In 2017
Many who itemize now won’t want to itemize next year, so you want to make sure you get a tax benefit in 2017 for that charitable contribution. If you take the standard deduction in 2018, you won’t get any tax savings from your charitable contributions, (unless those contributions will be greater than the standard deduction). If you anticipate itemizing your deductions for the 2017 tax year but not doing so in 2018, consider giving to charity by year-end to maximize your deductions.
Also, it’s more likely you will be in a higher tax bracket in 2017, and will benefit more from the charity.
3) Pay off Your Home Equity Loan
Currently, interest expense on $100,000 of a home equity loan is deductible. However, for tax years 2018 through 2025, there is no deduction available for interest on home equity indebtedness. Consider paying off the loan early so that you don’t lose the value of the deduction. However, check with your bank if there is a prepayment penalty.
4) Pay Medical Expenses
The new law lowers the threshold for deducting medical expenses to 7.5% (from 10%). retroactive to the beginning of 2017. You can deduct medical and dental expenses paid in 2017 which exceed 7.5% of your adjusted gross income. Medical bills that have not been paid, should be paid before year end, and any procedures that can be done before year end, will increase your deduction.
5) Fund a 529 Plan
Beginning in 2018, you can use up to $10,000 of 529 savings plans per student for Yeshiva elementary and secondary schools. Until now they have only been allowable for college expenses. The investment income earned on the plan is not taxable as long as the withdrawals are used for tuition. This benefit can be significant when large sums are invested over a significant number of years.
6) Delay Income Until 2018
Delay income until January when the tax rates are lower, especially if you are a small-business owner. For example, if your business reports income on the cash basis, you may wish to defer collections until January, 2018. In addition to lower tax rates, small business owners get a complex benefit starting in 2018 of being able to deduct 20 percent of their business income.
7) Pay Business Expenses Now
Currently, employees can deduct their “unreimbursed business expenses” on their taxes if the total is more than 2 percent of their adjusted income. But that deduction is no longer available in 2018. Accordingly, expenses such as union dues or professional fees, or supplies for your job should be paid before year end.