· Your tax rate is likely going down. A single person making $150,000, for example, will see his/her rate dropping from 28% to 24%. A married couple making $250,000 will see their rate drop from 33% to 24%. Whether married or not, the top rate has gone from 39.6% to 37%.
· You will lose your personal exemptions next year. For 2017 the exemption amount is $4,050 for you, your spouse and every tax dependent.
· To make up for the loss of the personal exemptions, your standard deduction is going up in 2018. A single taxpayer will increase from $6,350 to $12,000. A married taxpayer will go from $12,700 to 24,000.
· Many of your itemized deductions will be limited or go away altogether next year:
· Medical expenses – for some reason – go the other way. Congress reduced the threshold from 10% to 7.5%, and it made the change retroactive to January 1, 2017. It is one of the few retroactive changes in the bill, and it will exist for only two years – 2017 and 018.
· Get divorced and you might pay alimony. For 2017 you can deduct alimony you pay, and your ex-spouse has to report the same amount as income. Get divorced in 2019 or later, however, and your alimony will not be deductible, and it will not be taxable to your ex-spouse.
· Move in 2017 and you may be able to deduct your moving expenses. There is no deduction if you move in 2018 or later.
· You still have the alternative minimum tax to worry about in 2018, but the exemption amounts have been increased.
· If you own a business, chances are the new tax law will affect you. For example,
· Your kid will provide a larger child tax credit. The credit is $1,000 for 2017 but will go to $2,000 in 2018.
· Rates are going down. Delay your income if you can.
· For the same reason, accelerate your expenses, especially if you are cash-basis.
· Prepay your real estate taxes. Yes, that means pay your 2018 taxes by December 31.
· Pay your 4th quarter state (and city) estimated tax by December 31. You may even want to sweeten it a bit, although the tax bill does not permit one to prepay all of 2018’s state tax by December 31.
· Remember that you are losing your 2% miscellaneous deductions next year. If you use your car for work and are not reimbursed, you will lose out. It is the same for an office-in-home.
· Congress is limiting or taking away many popular itemized deductions and replacing them with a larger standard deduction. This means your remaining deductions – mortgage interest, taxes (what’s left) and contributions are under pressure to exceed that standard deduction. If you do not think you will be able to itemize next year, you may want to accelerate your contributions to 2017. Remember that the check has to be in the mail by December 31 to claim the deduction in 2017.