(The opinions expressed here are those of the author, a columnist for Reuters.)
By Gail MarksJarvis
CHICAGO (Reuters) – Grab those tax deductions while you can because tax reform could make some favorites extinct or undermine their value next year.
While the U.S. House of Representatives and Senate have a lot of wrangling to do before any tax changes become definite, many deductions are on the chopping block for future returns. Your 2017 taxes, which you will file by April 15, 2018, apparently will not be affected, but any changes will affect you starting Jan. 1, 2018.
Tax experts suggest people start preparing now to implement strategies before the end of this year.
“Start looking, monitor and be ready to act by mid-December,” said Mark Luscombe, tax analyst with Wolters Kluwer Tax and Accounting. But beware of hasty action, he said, because if Congress leaves the current tax system intact, you may want your typical deductions to lower your 2018 return.
Here are some moves to consider now:
* Max your state and local taxes
One of the hotly debated issues between the House and Senate is whether to cut taxpayers off completely from deducting state and local taxes – everything from property taxes on their homes to state income taxes and sales taxes. Depending on the final arrangement, you may no longer get to deduct these after 2017, although the House preserves the property tax deduction up to $10,000.
State and local taxes can be substantial, so grab as much as you can now. If you have taxes due in early January, consider paying in December to maximize your 2017 deduction, Luscombe recommended. Just avoid tinkering too much to maximize deductions in 2017. That might bring about the alternative minimum tax, an additional tax for some people that could be lifted by Congress in 2018, but still applies in 2017.
* Push 2018 tax items into 2017
After this year, many people may be better off taking the proposed higher standard deduction of $24,400 for couples or $12,000 for individuals. As a result, Luscombe suggested maximizing itemized deductions in 2017.
While the charitable deduction may not go away, in the future you may find no value in using it if you no longer itemize. So you should consider giving large donations before the end of 2017.
The same goes for the mortgage interest deduction, which may remain on loan amounts up to $500,000 for new home purchases. Taxpayers who think they will not itemize in the future should think about pre-paying some early January expenses in 2017.
The deductions and credits aimed at helping families pay for college are also up for an overhaul and people could lose the right to deduct up to $2,500 of student loan interest a year. So make those payments count as much as possible this year; perhaps paying what you otherwise would let go until after the New Year.
* Go to the doctor
Under a House measure, people with large medical bills would no longer get to deduct some of the expenses on their taxes, although this is not included in the Senate version as of now. Chris Hesse, a Minneapolis certified public accountant with CliftonLarsonAllen, urged people to consider clustering as many medical costs as possible in 2017 to meet a threshold for deducting expenses once they surpass 10 percent of adjusted gross income. Think: dentists, hearing aids, glasses, non-emergency planned surgery.
* Moving for a job
Currently, if you need to move for a new job or a transfer at least 50 miles away, you can deduct expenses. That may not be the case for 2018, so rushing a move into 2017 could harness a deduction.
* Get advice now
In the future, you may not be able to deduct the cost of going to experts such as certified public accountants for tax help. So this could be the year to load up on advice if that and other miscellaneous itemized expenses would cost more than 2 percent of your adjusted gross income.
* Buy an electric car
There is currently a credit of up to $7,500 for the purchase of some electric cars. While that would end under a House proposal, beware of a quick purchase. Only some plug-in cars qualify, and the credit ends if manufacturers have sold more than 200,000.
Source: Investing.com
