A new comprehensive tax act was
passed this week by the House and Senate. Originally, most tax professionals anticipated that this bill would permit state and local taxes due in 2018 to be prepaid in 2017 to avoid the $10,000 cap on these taxes under the new tax law. However, under this fast-moving situation, many tax professionals now indicate that such prepayments are likely not available to reduce 2017 taxes. Below are two recent analyses on this issue, and it is important to promptly consult with your tax professional before making a final decision in this regard.
"Under the conference bill, state and local tax deductions will remain in place but will be capped at $10,000 for state and local sales, income and property taxes. And yes, they already know what you're planning, so amounts paid in 2017 for state or local income tax which is imposed for the 2018 tax year will be treated as paid in 2018. In other words, you can't pre-pay your 2018 state and local income taxes in 2017 to avoid the cap." Forbes Magazine
"The tax bill would limit how much state and local taxes (or SALT) individuals can deduct, to no more than $10,000 of a combination of property taxes and either income or sales taxes....As a result, advisers had been planning to instruct clients targeted by this provision to find ways to maximize their SALT deduction in 2017, by pre-paying next year's taxes as much as allowed and deducting them under the old rules. But the final compromise bill, unveiled Friday by Republicans in the Senate and House, explicitly closes this loophole. Any 2018 local taxes that are paid this year would need to be counted on next year's taxes, according to the bill. However, any taxes due for 2017-or any late taxes from previous years-could still be deducted on a tax return due this April." zbt Certified Public Accounting and Consulting, LLC