Congress is enacting the biggest tax reform law in 30 years — one that will fundamentally change the way your federal income tax bill is calculated. Since most of the changes will go into effect next year, there’s still a narrow window before year-end to soften or avoid the impact and best position yourself for the tax breaks that may be heading your way.
Here are 7 last-minute moves to consider as 2017 comes to a close:
- If you’re about to convert a regular IRA to a Roth IRA, postpone the conversion until next year. That way, you’ll defer income from the conversion until next year and have it taxed at lower rates.
- If you’re not subject to the Alternative Minimum Tax (AMT), pay the last installment of your 2017 estimated state and local taxes no later than December 31, 2017, rather than on the 2018 due date.
- Charitable contributions after 2017 may not yield a tax benefit because you won’t be able to itemize deductions, so consider accelerating some charitable giving into 2017.
- Consider accelerating “discretionary” medical expenses into this year. For example, get new glasses or contacts, or see if you can squeeze in expensive dental work such as an implant.
- If a higher alternative minimum tax (AMT) exemption in 2018 means you won’t be subject to the 2018 AMT, it may be worthwhile to push such deductions into next year, such as exercising an incentive stock option (ISO).
- Under the new law, alimony payments aren’t deductible by the payor or includible in the income of the payee, generally effective for any divorce decree or separation agreement executed after 2017. So if you’re in the middle of a divorce or separation agreement and anticipate winding up on the paying end, it would be to your advantage to wrap things up before year end. On the other hand, if you’ll likely wind up on the receiving end, it would be worth your while to wrap things up next year.
- The new law suspends the deduction for moving expenses after 2017 (except for certain members of the Armed Forces), as well as the tax-free reimbursement of employment-related moving expenses. So if you’re in the middle of a job-related move, try to incur your deductible moving expenses before year-end. Or, if the move is connected with a new job and you’re getting reimbursed by your new employer, press for reimbursement before year-end.
These are just some of the general year-end moves that should be considered in light of the new tax law. As always, this should not be considered tax advice. Be sure to consult with your CPA or tax advisor for advice specific to your situation.