The new Republican tax bill would cap the deduction for state and local taxes at $10,000 through 2025. This will be the total deduction allowable for state income tax, local tax and property taxes. For those of you living in high tax states such as California and New York, pay your state and local income taxes and property taxes before December 31, 2017. Pay the next installment of your property tax now. If you have had a significant taxable event in 2017 such as the sale of your personal residence, or significant capital gains, your state will require their income tax be paid. They don’t care about the deductibility on your federal return. But if you don’t pay now, you will be limited by the amount you can deduct on your 2018 federal tax return to the $10,000 limit.
I fully expect the conference version of the proposed tax bill to be signed into law before Christmas. We must live by the new rules beginning in 2018. But you still have time to take advantage of current tax law for 2017.
By J. Mark Olson CPA
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