Tax Reform Bill as of December 14, 2017
With the ever-changing tax reform, make sure you prepare ahead of time. Don’t be blindsided by the potential changes that tax reform could bring. Alan Clopine, CPA walks you through critical year-end tax planning strategies that you might want to implement before 2018.
“There’s a final Republican tax bill. House and Senate party leaders have negotiated differences between their two bills.
Now this bill is still being written as we speak. This is changing hourly, daily, so stay tuned. Some of the information I’m telling you may change but here’s what we know at this point.
There are a couple things that may go away starting next year.
One is the ability to deduct your state and local taxes except up to about $10,000.
That’s what’s in the current bill that the Senate and House will be voting on.
In other words, if you have property taxes of $6,000 and state taxes of $10,000, that’s $16,000. You can only deduct $10,000 of that.
So you might want to prepay your state taxes for 2017 before December 31st.
You also might want to prepay your April tax payment by December 31st to make sure that you’re getting a full deduction because you may not get that deduction next year.
Here’s another thing that’s really important and we’re being a bit cautious here, but Roth IRAs.
When you convert an IRA to a Roth IRA you have to pay tax on the conversion.
Some of you may have done a Roth conversion realizing that you can always undo a Roth conversion in the next tax year all the way to your filing due date.
In other words, you could do a $50,000 Roth conversion in 2017 and by April 15th you could recharacterize all or part of that and pay no tax if you’re a too high of a tax bracket.
It looks like in this bill recharacterizations are going away.
And nobody knows this for sure but there’s a concern that the recharacterizations will not even be available next year for 2017.
So we’re advising all people that have done Roth conversions in 2017 if you’re planning to recharacterize or undo some of this please do it by December 31st to be safe and don’t delay because your brokerage firm, like Fidelity or TD Ameritrade, they may not be able to process this on the last couple days of the year.
So do this right now, as soon as you get this message.
If you’re planning to recharacterize, please be safe because you may not be able to recharacterize next year.
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