The following is a quick brainstorming list of things to think about doing if/when the TCJA becomes law. They don’t need to be done before the end of 2017 so I carved them out separately from my previous post.
- Update your tax withholding to account for your new level of deductions. Note that IRS guidance on this may be delayed until late Jan / early Feb due to the complexity in calculations.
- Payoff HELOC debt if the loss of tax deductibility makes the after-tax interest rate cost prohibitive vs. other options.
- Revise estate plan (if necessary) to account for bigger exemption. Consider lifetime gifting plans to take advantage of the bigger exemption if estate tax may be an issue for you in the future.
- Increase 529 contributions to account for private K-12 expenses if you know you will incur those expenses.
- Keep in mind that alimony will not be deductible to the payer / taxable to the receiver starting with divorces that take place after 12/31/18 (the bill gives one extra year to prepare for this).
- If you have any children with financial accounts in their names, review the new “kiddie tax” rules and plan accordingly as their tax system has shifted to follow the trusts and estates rates.
- If you have an AMT credit, likely due to the exercise of an Incentive Stock Option, without a corresponding sale in the same year, prepare for that credit to get “released” more quickly (i.e. larger credit each year until fully used).
- Note that the floor for deducting medical expenses in 2017 and 2018 only, is changing from 10% to 7.5% (if you’re able to itemize). For some, this may mean tracking their out-of-pocket expenses and providing them to their tax preparer at tax time. Again, this is retroactive and applies to 2017.
- Since unreimbursed employee expenses are no longer deductible, the days of keeping mileage logs to take a tax deduction for use of your vehicle for work as an employee are over (unless required for your employer to reimburse you). In a related note, if you use your car for work as an employee (outside of commuting) and your employer doesn’t pay for that mileage, it’s worth discussing that with them since you are no longer going to be able to deduct the mileage for tax purposes.
- If you own a business, client entertainment is no longer deductible. Meals are still 50% deductible. Keep that in mind when setting up events if the tax treatment matters.
- Employers can no longer reimburse employees tax-free for moving expenses. Any moving expense that an employer pays will be considered taxable income. If you’re signing on with a new employer and they say they’ll pay for moving expenses, ask them to “gross up” those payments such that you are made whole after-tax. If they refuse, note that they’re really only paying / reimbursing you for 55-80% of the net moving cost.