How to Reduce Your 2017 Tax Bill Before Trump’s Tax Bill Goes Into Effect
December 23, 2017
President Trump says he’s giving Americans an “incredible Christmas gift” with tax cuts and a massive overhaul of the U.S. tax code, but the changes don’t take effect until Jan. 1. If you act by New Year’s Eve, tax experts say you can reduce your tax bill for 2017 — and 2018.
The basic advice is: Do everything you can to load up on tax deductions in 2017.
First, give more to charity in 2017. Have you been meaning to donate a couch to the Salvation Army or Goodwill? Or do you feel it’s about time to give a little more to your religious institution or alma mater? If so, get it done by year’s end. It helps reduce your income this year when tax rates are higher. Plus, you might not end up itemizing next year since the standard deduction is nearly doubling.
“A lot of people who itemize now won’t want to itemize next year, so they want to make sure they get a tax benefit in 2017 for that charitable contribution,” says Bradley Heim, a professor at Indiana University who worked in the Treasury Department’s Office of Tax Analysis under President George W. Bush and President Barack Obama.
If you take the standard deduction in 2018, you won’t get any tax savings from your charitable contributions.
Second, try to prepay your 2018 property taxes. If you own a home, you are familiar with property taxes. At the moment, you can deduct your local property taxes from your federal income tax bill, but starting Jan. 1, there’s a $10,000 limit on all of your state and local taxes, including property taxes.