Congress Approves Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act has been approved by Congress and is awaiting signature by the President. Click here for a summary of the bill.

There are significant changes that will come about as a result of this tax bill. The changes will have an impact on businesses and individuals. It might make sense to look at your business/personal tax situation before the end of the year in order to insure you take advantage of certain aspects of existing tax law before the new law takes effect.

We have listed just a few of these considerations below.

Individual items to consider

  • The standard deduction is going to increase in 2018 for all filing statuses. The new standard deduction amounts for the various filing statuses are listed below:
    • Single – $12,000
    • Head of Household – $18,000
    • Married Filing Joint – $24,000
  • If you currently itemize your deductions, but under the new law the standard deduction will be higher, consider increasing itemized deductions this year. Several examples are listed below:
    • Consider making additional charitable contributions this year that you may not be able to deduct next year due to the increased standard deduction.
    • Consider paying fourth quarter state tax estimates in December as well as any state balance that would be due in April, 2018.
    • Consider paying Indiana real estate taxes due next year before the end of the year.
  • The itemized deduction for state and local taxes (both income and property tax) will be limited next year to a maximum of $10,000.  If you believe you will be able to itemize your deductions next year and your state and local tax deduction will exceed $10,000 next year, you should consider the following:
    • Pay your fourth quarter state estimates in December.
    • Pay any state income tax that will be due in April, 2018 with your 4th quarter estimate.
    • Pay Indiana real estate taxes due next year before the end of the year.

Business items to consider

  • Business and Individual income tax rates are dropping next year under the new tax bill. As with individuals mentioned above, there are actions you might consider taking before this year end to take advantage of deductions under the current tax structure.  Companies and partnerships might consider the following:
    • Prepay expenses that can be expensed under business’s method of accounting.
    • Place equipment in service before the end of the year to take advantage of 100% bonus depreciation or Section 179 expensing.
    • Complete like-kind exchanges of personal property before the end of the year as beginning next year, the ability to defer gain by utilizing like-kind exchange for property other than real estate will not be allowed.

As you can see from the summary, the law brings about sweeping change. Most of this is effective for 2018, but may create some urgency for actions you will want to consider yet in 2017.

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