New Tax Legislation: What happens now?

Both houses of Congress have passed separate tax bills, which now must be reconciled in the Conference Committee, approved again by both houses, and signed by the President.  While we won't have true clarity until the bill emerges from committee, what we know now is that there are some good things and some not so good things in the bills that were passed. 

The tax changes are unlikely to impact the 2017 tax year, but will impact future tax years.

Some of the good for some: 

• Small businesses, including sole proprietors and freelancers, would still be able to claim business expenses as before.
• C-corps would benefit from a lower tax rate, and certain types of income from pass-through entities (LLC's, partnerships, and S-corps) would also benefit from a lower tax rate.  
• Individuals with children under 17 would receive an expanded child tax credit. 
• Standard deduction for individuals would nearly double.

Some of the not so good:

• Itemized deductions for individuals could be eliminated or limited:

<img height="22" src="https://static.wixstatic.com/media/5e9922_c5272b450d59436cbb8bb750eb0bb3cb.png_256" width="22">Personal exemption (eliminated)

<img height="22" src="https://static.wixstatic.com/media/5e9922_c5272b450d59436cbb8bb750eb0bb3cb.png_256" width="22">State and local tax deduction (eliminated)

<img height="22" src="https://static.wixstatic.com/media/5e9922_c5272b450d59436cbb8bb750eb0bb3cb.png_256" width="22">Medical expense deduction (eliminated)

<img height="22" src="https://static.wixstatic.com/media/5e9922_c5272b450d59436cbb8bb750eb0bb3cb.png_256" width="22">Home mortgage interest deduction (limited)

• ACA/Obamacare mandate would be eliminated

The most important thing to know is the Treehouse Nerds are closely monitoring the progress of the bill and will have regular updates for you on our new blog with more detailed explanations and ideas of how these changes will impact our clients.

In short, We've got you!

Do these things before 12/31:

* For independent contractors and small business folks looking for more business expenses in 2017, using a credit card is the same as using cash.  The expense is recognized for tax purposes in the year the charge is incurred, not the year you pay off the credit card balance. So go ahead and buy the office supplies or small electronics you need before the end of the year.

* Give ‘til it feels good. If you’re planning to donate to charity, do it before the end of the year. Your donations may reduce your taxable income if you itemize deductions on a Schedule A. Remember that charitable contributions must be made to qualified organizations with 501(c)(3) status. Get and keep the receipt. You’ll need it (for donations of $250 or more). If you donate your used household items or clothes, get the receipt!

* Get the full benefit of potential tax deductions If you had a particularly good year, or simply have the cash on hand, consider making an extra mortgage payment (the interest is deductible) or even prepay real estate taxes before the end of the year to allow for an extra deduction.

GENERAL TIPS:

Get your business receipts compiled and organized now to reduce your anxiety. When 2018 comes, you don’t want to be looking frantically for receipts from the summer of 2017. Email us for a copy of our expense categories so you are ready for your appointment at the Treehouse.

Contribute to your Roth or Traditional IRA.

If you’ve been thinking about opening or increasing your contributions to a Traditional or a Roth IRA, you can contribute and have those contributions count for the previous year up until April 15 of the following year.

So, if you’re still on the fence, your window of opportunity has not yet closed. You can make those contributions as long as you do it by April 15, 2018. If you’ve got questions, email us to receive our Roth IRA vs. Traditional IRA comparison.

Don't forget: your 2017 4th quarter estimated tax payment is due on 1/16/18. You can mail in a check with the vouchers or you can pay online.
IRS: https://www.irs.gov/payments

CA: https://www.ftb.ca.gov/online/WebPay/index.asp 

NY: https://www.tax.ny.gov/pit/estimated_tax/filing_estimated_income_tax.htm