Well, it’s finally here. We’ve been hearing about tax reform for a long time and now it is headed to President Trump’s desk for signature. To fully digest this new information will take months as interpretations get ironed out. Today’s commentary is designed to cover more pressing considerations as it relates to 2017 and steps you should consider taking before year-end. In an attempt to de-mystify the complex, here you go:



We are retaining the same number of tax brackets, there is tax relief generally with each level of income, with the top rate down to 37%.

ACTION: This would suggest deferring income into 2018 where possible, and accelerating deductions in 2017. Additionally, if you have Unrealized Losses in any investment or property, consider selling before year-end to offset other capital gains, and possibly write-off up to $3,000 of Ordinary Income. (please consider all details of your personal investment plan when making these decisions)



The Standard Deduction is getting a hefty raise, essentially doubling what it is today. For individuals it was raised from $6,350 to $12,000 and from $12,700 to $24,000 for married couples filing joint. At the same time, several Itemized Deductions are being eliminated or limited. State & local income taxes, along with property taxes are being limited to $10,000. Miscellaneous itemized deductions, such as tax preparation fees and investment advisory fees will be eliminated in 2018. We expect many people will become Standard Deduction filers, thus negating the tax benefits of mortgage interest and medical expense deductions.

ACTION: If you believe you will owe any state or local income taxes, we would recommend paying them through a quarterly estimate in 2017. You are not allowed to prepay your 2018 state or local tax liability, but if you will owe for 2017, pay it before the end of the year. If you are not paying Alternative Minimum Tax (AMT), it will likely make sense to prepay all or a portion of your property taxes before year-end that would normally be due in 2018. It is our understanding that you must have an invoice for the property tax due, dated in 2017, to be eligible to accelerate this payment. Please consult your tax preparer for additional guidance. Additionally, you should consider the acceleration of charitable gifts because if you are moved to the Standard Deduction next year, those gifts in theory are no longer deductible. Prepaying your PDS advisory fees for 2018 in this calendar is not an option as it creates compliance issues for us to receive those too far in advance.



There are many other provisions in this tax reform worth noting and those will be discussed throughout 2018 as we work on your personal financial planning. Significant changes to small business income taxes, estate tax exemptions, alternative minimum tax, and section 529 plan changes for Ohio residents all will be considered as we provide advice to you going forward. If you have any questions, please know that we are always here to help. We wish you a safe and happy holiday season.