Unless something crazy happens this week, we have a new tax plan. If Congress-watchers are right, the House and Senate should vote to pass this new bill, and it will be signed by President Trump before Christmas.
I’m writing this on Monday the 18th (a busy week is ahead!), and I’ve already spent some time digging into the changes … and there are MANY. Especially for New York Metropolitan Area business owners.
From pass-through changes, to the “service based business” test, there are many things to take advantage of in 2018 that will make it very profitable for you to have a smart tax professional in your corner. As I believe I’ve recently said, the prospects for savings in this new tax bill for smart New York Metropolitan Area business owners are downright appetizing.
On the personal side, a couple things I should point out…
1) The first one I mentioned last week, but there’s been a shift: Congress put in a change that now means you can NOT prepay your 2018 state income tax to pick up a deduction in 2017 after all. That said, you can pay everything now that you will pay with your 2017 filing (because the last thing you want is to have to pay in 2018 for state taxes in 2017).
Starting in 2018, you can still deduct up to $10K of state and local taxes and property taxes. In high tax states, this is going to hit you hard, because you’ll be losing some of those deductions.
However, there are plenty more deductions to be had under this new regime that *should* offset some of these losses … if you know what you’re doing.
2) And the second piece of advice that I am giving to my New York Metropolitan Area clients on the personal side is a bit upside down for New York Metropolitan Area business owners. For your PERSONAL tax return, almost everyone, if possible, should delay income for these next few weeks into 2018 if at all possible.
Which means that you might have employees wanting to see that from you. But it also means that you’ll likely want to put expenses in 2017 instead of 2018. With lower rates in many cases in 2018, delaying expenses like payroll, etc. until January doesn’t help you as much as if you cut your income for 2017.
Every situation is different, and it will make sense to dive into your P/L’s a little and make a smart choice.
Again, much more to come on the changes for 2018 in future weeks and months.
I’ll leave you today with my annual holiday prayer. I love this one, and share it every year because it’s more and more pertinent. As we shout past each other online, and it bleeds into our interactions in person (“IRL”, as the kids say) we should remember that there are real stories behind every person.
May we see each other with clear eyes.
2018 Tax Reform Update And A Holiday Prayer from Allan
“There are no strangers here; Only friends you haven’t yet met.” -William Butler Yeats
“God, help us remember that the jerk who cut us off in traffic last night is a single mother who worked nine hours that day and is rushing home to cook dinner, help with homework, do the laundry and spend a few precious moments with her children.
“Help us to remember that the pierced, tattooed, disinterested young man who can’t make change correctly is a worried 19-year-old college student, balancing his apprehension over final exams with his fear of not getting his student loans for next semester.
“Remind us, Lord, that the scary-looking bum, begging for money in the same spot every day (who really ought to get a job!) is a slave to addictions that we can only imagine in our worst nightmares …
“Help us to remember that the old couple walking annoyingly slowly through the store aisles and blocking our shopping progress are savoring this moment, knowing that, based on the biopsy report she got back last week, this will be the last year that they go shopping together.
“Father, remind us each day that, of all the gifts you give us, the greatest gift is love. It is not enough to share that love with those we hold dear. Open our hearts not to just those who are close to us, but to all humanity. Let us be slow to judge and quick to forgive, show patience, empathy and love. ”
From one New York Metropolitan Area business owner to another: may your season be truly bright.
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Allan J Rolnick
Allan J Rolnick, CPA, CTC