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AAFCPAs Advises Clients on Year End Tax Savings Strategies in Response to Tax Bill Conference Report

On Friday, December 15, Congress released the contents of the Conference Report to the Tax Cuts and Jobs Act. The bill requires a final vote this week in both the House and Senate, at which point it will be sent to the White House for the President’s signature. The stated goal is to have the bill signed prior to Christmas.

One area that has generated much discussion is the $10,000 cap on the deduction for state income and property taxes, starting in 2018. Prior to the release of the Conference Report, numerous publications had considered the possibility of prepaying 2018 state income taxes prior to December 31 of this year in order to obtain the deduction in 2017.

This question has been directly addressed in the bill, which includes a provision specifically barring a 2017 deduction for state or local income tax payments attributable to a tax year beginning after December 31, 2017. Assuming no further changes to this provision prior to the President’s signature, prepaying 2018 state or local income taxes in this manner will not prove to be a viable tax savings strategy for 2017.

Despite that limitation, other tax payments may still be deducted in 2017 if paid prior to December 31. For Massachusetts residents, this would include the third quarterly real estate tax payment, normally not due until February 1, 2018. In addition, payments of a state tax estimate for the fourth quarter of 2017 will be deductible if paid prior to December 31. Note that overpayments received in 2018 will remain taxable, though those refunds might be taxed at a lower rate depending on one’s particular circumstances.

It is important to emphasize that the Alternative Minimum Tax remains in force in its present form for 2017. Accordingly, the benefit of making advance tax payments that would otherwise be allowable may be significantly limited. For this reason, it is important that this and other tax savings strategies be discussed in advance with your AAFCPAs tax advisor.

AAFCPAs will continue to monitor the legislative process and keep you informed as significant changes occur or provisions become clarified. If you have any questions please contact your AAFCPAs partner, or Richard Weiner, CPA, MST at 774.512.4078, rweiner@nullaafcpa.com.

About the Author

Richard Weiner CPA
Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.