Tax Attic: Tax provisions will begin to take effect in 2018

The weather last weekend was spectacular. On Saturday, turnout for the Chamber of Commerce’s annual Christmas Parade was, by all accounts, the biggest ever. It seemed like every kid in West Michigan was in Rockford trying to catch a wink and a nod from Santa. As a City Councilman, I had the honor of walking the parade route and passing out candy along with Mayor Steve Jazwiec. My wife, Deb and our grandson, Rowan, rode in the carriage in front of Santa along with Councilman Terry Konkle. I’m sure Rowan will remember the parade for a long time. The Christmas lights came on Friday night and if you haven’t been downtown to see the lights, you are missing a great display. Jamie Davies and the Rockford Public Works department employees deserve our thanks for the lighting display that they have been working on for the past few weeks. Very impressive. At this time of year, Rockford shows it is just a wonderful place in which to live, visit, and shop.

The last few weeks have been very interesting for those of us in the income tax business. The Senate and the House have both passed their own version of major tax bills. A conference committee will now decide what the final provisions will look like. There is no doubt, however, that this tax bill will affect practically every taxpayer and corporation in the United States. It has enough assorted provisions that all taxpayers will be affected with most either seeing a tax increase or a tax decrease with some taxpayers breaking even but those taxpayers will be few and far between. My initial reaction is that most taxpayers will see a tax decrease and it looks like almost every corporation will see a tax decrease. The good news is that tax provisions will begin to take effect for the 2018 tax year and will continue to kick in over the next few ensuing years. No provision will directly affect the 2017 tax year but let’s take a look at how they will indirectly affect this year. Many of us should take the month of December to make some tax moves that will save tax dollars this year that might have been lost if the taxpayer had waited until 2018 to make.

For example, under both plans, the standard deduction is projected to practically double for 2018. A majority of taxpayers who will itemize deductions on the Schedule A in 2017 will not have enough itemized deductions to qualify to file the same Schedule A in 2018. What that means is it will be tax advantageous to pay those real estate property taxes that are due in February 2018 before December 31. Payment of the bill in February 2018 will most likely result in no tax advantage. It could also be advantageous for those taxpayers who pay State of Michigan or City quarterly estimated income tax payments to pay the 4th quarter estimated tax payment that is due in January 2018 before December 31. Again, a deduction will be gained by not waiting until 2018 to make the payment. For some taxpayers, purchasing a vehicle and being able to deduct the sales tax before December 31 could result in tax savings this year. Another itemized deduction that could result in a tax deduction for this year could be making charitable contributions by December 31 instead of waiting until 2018. Making some or all of these tax motivated moves by December 31 could save tax dollars this year. It might pay to contact a tax professional to determine if it is worthwhile for you to make those payments early. As this tax bill makes its way through the committee process, I will continue to write about it. This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent.

He owns Action Tax Service on Northland Dr in Rockford.

Contact Jerry at www.actiontaxservice.com