# Act before the end of 2017 to preserve your 2018 tax deductions. **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [December 16, 2017, 2:01am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601 "2017-12-16T02:01:31Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 16, 2017, 2:01am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/1 "2017-12-16T02:01:31Z")
The new tax bill now seems certain to pass. The new law will severely reduce your ability to take itemized deductions on your federal tax returns in 2018 and beyond. And even if you can still take itemized deductions, it will put a severe limit on the amount of state and local income and property taxes you can deduct. What to do? Prepay your 2018 state and local taxes and other deductible expenses before the end of 2017 so you can deduct them on your 2017 return. For example, if you normally make state estimated tax payments, pay the installment due on 1/15/2018 in December 2017. If you expect to pay a balance due when you file your state income tax return on 4/15/2018, make a 4th quarter estimated tax payment in December 2017 instead. Not sure how much to pay? If you overpay, you will get a refund when you file your tax return, but the refund will be taxable next year (when the rates are allegedly lower than this year). If you are subject to the AMT, consult your tax advisor before trying this. Illinois Residents: The Illinois Department of Revenue has released instructions today on [how to prepay your 2018 Illinois income taxes in December of 2017. (pdf)](http://tax.illinois.gov/News/Instructions_for_2018_ES_Payment.pdf) Cook County Residents: The Cook County Treasurer’s office [has published instructions](https://cookcountytreasurer.com/prepayment.aspx) for how to pay your first installment property taxes, normally due on 3/1/2018, in 2017. (Note: Illinois bills property taxes a year in arrears. That means 2017 property taxes are paid in 2018.) ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 16, 2017, 6:58am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/2 "2017-12-16T06:58:53Z")
Gosh darn dammit. The new law has a section (Sec 11042) saying that any state or local income tax paid in 2017 or earlier that is imposed for a tax year of 2018 or later will be treated as if it was paid in the year the tax was imposed, not the year it was paid. So you can still pay the balance due on your 2017 income taxes or estimated income taxes in 2017 and take a deduction. But don’t prepay your 2018 income taxes. This limitation does not apply to property taxes. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 16, 2017, 3:25pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/3 "2017-12-16T15:25:30Z")
Great advice, and I hope everyone plans for it!! I’ve already paid all my (very high) property taxes, and I even sold some stock that I was expecting to sell within the next year or so. CA doesn’t have provisions for long term capital gains, so even though this is stock I bought almost 20 years ago, the gains won’t be discounted or indexed for inflation. At least I’ll be able to deduct the state income tax off my income for federal purposes. Now, you should actually go through the calcs and makes sure that you don’t come out ahead in the new scheme. It’s possible, since the rates are lower, but in my case they don’t do the trick. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [December 16, 2017, 5:05pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/4 "2017-12-16T17:05:07Z")
> [@](#): > > And even if you can still take itemized deductions, it will put a severe limit on the amount of state and local income and property taxes you can deduct. Isn’t the limit $10,000? I don’t know that I would call that a “severe” limit. That’s a lot of income and property taxes. I agree with this change. Why should the federal government allow full deduction of state and local taxes that exceed that rather high amount? The tax codes are full of deductions that are limited to some amount, or that you can’t use unless the amount is over some hurdle. And you’re right to point out the doubling of the standard deduction, which will work out better for a lot of families. Sure, I would prefer a flat tax with no deductions whatsoever, but I don’t see that ever happening… in my lifetime, at least. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [December 16, 2017, 10:03pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/5 "2017-12-16T22:03:55Z")
> [@Orwell](#): > > Why should the federal government allow full deduction of state and local taxes that exceed that rather high amount? There’s quite a few states with high taxes that it is pretty easy for a homeowner to exceed this amount. So it is pretty likely that quite a few middle-class families will see their taxes go up because of this change. Seeing as how the highest earners are far more likely to see a tax cut, it seems reasonable to object to taxes increasing on a family making, say, $100,000 a year, in order to cut taxes for families making $500,000 a year. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [December 16, 2017, 10:29pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/6 "2017-12-16T22:29:26Z")
> [@Ravenman](#): > > There’s quite a few states with high taxes that it is pretty easy for a homeowner to exceed this amount. So it is pretty likely that quite a few middle-class families will see their taxes go up because of this change. Seeing as how the highest earners are far more likely to see a tax cut, it seems reasonable to object to taxes increasing on a family making, say, $100,000 a year, in order to cut taxes for families making $500,000 a year. Many more families making $100k a year will pay less in taxes than more. Here is a NYT (not known for their pro-GOP or pro-Trump bias) showing most households will pay less in taxes, including those making around $100k. > **[What the Tax Bill Would Look Like for 25,000 Middle-Class Families (Published...](https://www.nytimes.com/interactive/2017/11/28/upshot/what-the-tax-bill-would-look-like-for-25000-middle-class-families.html)** > > We modeled taxes for 25,000 middle-class families. Here’s how the Senate bill would affect each of them. As was so glibly said about the ACA, there are winners and losers. As someone hammered by the ACA, and having local, state and property taxes well under $10k, I don’t have a problem with this particular aspect of the tax reform. But I recognize why those who are negatively impacted are upset, a bit of empathy I didn’t hear from the pro-ACA crowd. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 16, 2017, 11:27pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/7 "2017-12-16T23:27:27Z")
> [@Ravenman](#): > > There’s quite a few states with high taxes that it is pretty easy for a homeowner to exceed this amount. So it is pretty likely that quite a few middle-class families will see their taxes go up because of this change. Seeing as how the highest earners are far more likely to see a tax cut, it seems reasonable to object to taxes increasing on a family making, say, $100,000 a year, in order to cut taxes for families making $500,000 a year. I guess it depends on what you mean by “quite a few” and “middle class”. Only something like 35% of taxpayers even itemize now, so with the standard deduction doubling, that number is going to drop dramatically. And even if you do itemize, you are still going to see your tax rates go down, so there is an offsetting effect for those SALTs that put you over the $10K limit. I’d be very surprised if, in CA, a family of 4 with a gross income of $100K will see their taxes go up. It’s possible, but unlikely. It’s much more likely that the family making $500K is going to see taxes go up than the one making $100K, since they pay high state taxes and almost certainly more property taxes. It’s the super-wealthy who are going to see their taxes go down “big league”, at the expense of those in the $200K - $500K (or maybe a bit higher) range. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 16, 2017, 11:53pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/8 "2017-12-16T23:53:56Z")
> [@Alley\_Dweller](#): > > The new law has a section (Sec 11042) saying that any state or local income tax paid in 2017 or earlier that is imposed for a tax year of 2018 or later will be treated as if it was paid in the year the tax was imposed, not the year it was paid. > So you can still pay the balance due on your 2017 income taxes or estimated income taxes in 2017 and take a deduction. But don’t prepay your 2018 income taxes. > > This limitation does not apply to property taxes. I’m not seeing this. [Here is where I’m looking](https://www.congress.gov/bill/115th-congress/house-bill/1/text?format=txt) and what I’m seeing: > [@](#): > > SEC. 11042. SUSPENSION OF DEDUCTION FOR STATE AND LOCAL, ETC. TAXES. > > ``` > (a) In General.--Subsection (b) of section 164 is amended by adding > > ``` > > at the end the following new paragraph: > `(6) Suspension of individual deductions for taxable years 2018 through 2025.--In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026-- `(A) foreign real property taxes (other than taxes > which are paid or accrued in carrying on a trade or > business or an activity described in section 212) shall > not be taken into account under subsection (a)(1), > `(B) the aggregate amount of taxes (other than taxes which are paid or accrued in carrying on a trade or business or an activity described in section 212) taken into account under subsection (a)(1) for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return), `(C) subsection (a)(2) shall only apply to taxes > which are paid or accrued in carrying on a trade or > business or an activity described in section 212, > `(D) subsection (a)(3) shall not apply to State and local taxes, and `(E) paragraph (5) shall not apply.‘’. > (b) Effective Date.–The amendment made by this section shall apply > to taxable years beginning after December 31, 2017. Am I missing something? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 17, 2017, 12:02am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/9 "2017-12-17T00:02:50Z")
The thing about CA property taxes is that they run from Jul - Jul. I don’t know if that unusual, but my tax bill is called the 2017/2018 tax bill. Half of it is due in Feb 2018 (with a grace period thru Apr before a penalty kicks in), but it’s still for the combined year. I believe IL is that way, too, so maybe it’s not so uncommon. If I’m reading **Bone’s** cite correctly (and I could very well be reading that gobbledygook incorrectly), the definition is for tax years bringing after Dec 31, 2017. But CA’s property tax year states in July, so we should be good paying in full. No? ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 17, 2017, 12:12am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/10 "2017-12-17T00:12:09Z")
The “taxable year” in that section I believe refers to the tax payer’s taxable year, not the state’s taxable year. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [December 17, 2017, 12:32am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/11 "2017-12-17T00:32:00Z")
> [@Bone](#): > > The “taxable year” in that section I believe refers to the tax payer’s taxable year, not the state’s taxable year. I think you are correct, though I’m not an accountant, I suspect you can still pay early if you have a mechanism to do so. But I would ask your tax preparer to make sure. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 17, 2017, 2:01am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/12 "2017-12-17T02:01:45Z")
> [@Bone](#): > > I’m not seeing this. [Here is where I’m looking](https://www.congress.gov/bill/115th-congress/house-bill/1/text?format=txt) and what I’m seeing: > Am I missing something? You’re looking at the version of the bill that passed the Senate. The compromise bill that the House and Senate are probably going to pass next week is [here](http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf). ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 17, 2017, 2:09am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/13 "2017-12-17T02:09:54Z")
> [@John\_Mace](#): > > Great advice, and I hope everyone plans for it!! > > I’ve already paid all my (very high) property taxes, and I even sold some stock that I was expecting to sell within the next year or so. CA doesn’t have provisions for long term capital gains, so even though this is stock I bought almost 20 years ago, the gains won’t be discounted or indexed for inflation. At least I’ll be able to deduct the state income tax off my income for federal purposes. Make sure you pay the tax by the end of 2017 or else you won’t be able to deduct it on your 2017 federal return. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 17, 2017, 2:30am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/14 "2017-12-17T02:30:12Z")
> [@John\_Mace](#): > > The thing about CA property taxes is that they run from Jul - Jul. I don’t know if that unusual, but my tax bill is called the 2017/2018 tax bill. Half of it is due in Feb 2018 (with a grace period thru Apr before a penalty kicks in), but it’s still for the combined year. I believe IL is that way, too, so maybe it’s not so uncommon. In Illinois, the property tax imposed for the 2017 calendar year is payable in two installments due in 2018. This imposes a peculiar predicament for home buyers. They cannot claim a federal tax deduction for the real estate taxes they pay in the year they purchase the house, because they were not the owners of the house in the year the tax was imposed. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 17, 2017, 3:57am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/15 "2017-12-17T03:57:43Z")
> [@Alley\_Dweller](#): > > You’re looking at the version of the bill that passed the Senate. The compromise bill that the House and Senate are probably going to pass next week is [here](http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf). Thank you, that’s helpful. So here is what I’m reading: > [@](#): > > SEC. 11042. LIMITATION ON DEDUCTION FOR STATE AND > 22 LOCAL, ETC. TAXES. > 23 (a) IN GENERAL.—Subsection (b) of section 164 is > 24 amended by adding at the end the following new para > 25 graph: > > 1 ‘‘(6) LIMITATION ON INDIVIDUAL DEDUCTIONS > 2 FOR TAXABLE YEARS 2018 THROUGH 2025.—In the > 3 case of an individual and a taxable year beginning > 4 after December 31, 2017, and before January 1, > 5 2026— > 6 ‘‘(A) foreign real property taxes shall not > 7 be taken into account under subsection (a)(1), > 8 and > 9 ‘‘(B) the aggregate amount of taxes taken > 10 into account under paragraphs (1), (2), and (3) > 11 of subsection (a) and paragraph (5) of this sub > 12 section for any taxable year shall not exceed > 13 $10,000 ($5,000 in the case of a married indi > 14 vidual filing a separate return). > 15 The preceding sentence shall not apply to any for > 16 eign taxes described in subsection (a)(3) or to any > 17 taxes described in paragraph (1) and (2) of sub > 18 section (a) which are paid or accrued in carrying on > 19 a trade or business or an activity described in sec > 20 tion 21 2. For purposes of subparagraph (B), an > 21 amount paid in a taxable year beginning before Jan > 22 uary 1, 2018, with respect to a State or local income > 23 tax imposed for a taxable year beginning after De > 24 cember 31, 2017, shall be treated as paid on the last > > 1 day of the taxable year for which such tax is so im > 2 posed.’’. > 3 (b) EFFECTIVE DATE.—The amendment made by > 4 this section shall apply to taxable years beginning after > 5 December 31, 2016. There’s a few things I have quibbles with. The language in question that adjusts the dating only applies to Section B that describes the 10K limit. Also, it says it is with “_respect to a State or local income taxes imposed_”. Property taxes are neither state income taxes or local income taxes, so I’m not sure they are subject to this. Otherwise, the whole prepaying thing doesn’t seem like it’s going to fly. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 17, 2017, 4:17am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/16 "2017-12-17T04:17:30Z")
Just didsome back of the envelope calcs for my family. I think I’ll lose about 35-40K of deductions. Thats the amount of SALT over 10K and the exemptions lost. I’ll still be over the standard deduction, but much less so. That means the increase in standard deduction isn’t helpful, but the elimination of personal exemptions are pretty awful, given the number of folks in the household and dependents. That’s not great. CA has become less appealing. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 17, 2017, 4:29am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/17 "2017-12-17T04:29:53Z")
[I don’t understand:](http://money.cnn.com/2017/12/15/news/economy/gop-tax-plan-details/index.html) > [@](#): > > 1. Lowers tax burden on pass-through businesses: The tax burden on owners, partners and shareholders of S-corporations, LLCs and partnerships – who pay their share of the business’ taxes through their individual tax returns – would be lowered by a 20% deduction, somewhat less than the 23% called for in the Senate-passed bill. > > The 20% deduction would be prohibited for anyone in a service business – unless their taxable income is less than $315,000 if married ($157,500 if single). Trying to find code section that this refers to. I do have access to pass through income if I structure things in a certain way so this has potential. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 17, 2017, 11:43am UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/18 "2017-12-17T11:43:40Z")
> [@Bone](#): > > Just didsome back of the envelope calcs for my family. I think I’ll lose about 35-40K of deductions. Thats the amount of SALT over 10K and the exemptions lost. > > I’ll still be over the standard deduction, but much less so. That means the increase in standard deduction isn’t helpful, but the elimination of personal exemptions are pretty awful, given the number of folks in the household and dependents. > > That’s not great. CA has become less appealing. Did you see how much the lower rates will offset that? In my case, they don’t offset the full increase but they do help some. Also, I’m still not seeing why we can’t deduct both CA property tax payments in 2017. The taxable year starts in Jul 2017, which is before Dec 31. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 17, 2017, 2:48pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/19 "2017-12-17T14:48:59Z")
> [@Bone](#): > > [I don’t understand:](http://money.cnn.com/2017/12/15/news/economy/gop-tax-plan-details/index.html) > Trying to find code section that this refers to. I do have access to pass through income if I structure things in a certain way so this has potential. See Sec 11011 of the compromise tax bill. (page 23) ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [December 17, 2017, 5:35pm UTC](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601/20 "2017-12-17T17:35:44Z")
> [@Bone](#): > > Thank you, that’s helpful. So here is what I’m reading: > There’s a few things I have quibbles with. The language in question that adjusts the dating only applies to Section B that describes the 10K limit. Also, it says it is with “_respect to a State or local income taxes imposed_”. Property taxes are neither state income taxes or local income taxes, so I’m not sure they are subject to this. Otherwise, the whole prepaying thing doesn’t seem like it’s going to fly. The actual text of the conference bill seems pretty clear: ‘income tax’, which is not property tax. A couple of days ago a NYT story said it prohibited prepaying both income and property taxes, so that’s been echoing around among people who take the NYT as gospel, but now when I look at that story they’ve corrected it. There doesn’t seem any basis to think the prohibition includes 2018 property tax. I’m thinking it’s more of a stretch though to prepay and deduct in 17 prop taxes for 18 that haven’t even been billed. I have bills for Q1/2 2018 prop tax due in Feb and May 2018. I’m going to make sure my town will accept payment now, make sure the tax bill actually passes, then very likely pay 1/2 of 2018 prop tax this year and deduct it on 2017 return. [Next page](https://boards.straightdope.com/t/act-before-the-end-of-2017-to-preserve-your-2018-tax-deductions/804601.md?page=2)