As we continue to digest and analyze the details of the new Tax Law that recently passed, we wanted to forward along a great update from one of our business partners, Eddy Cheung, CPA at Legend Tax.
TEN TAX TIPS
Tax Tip #1 – Prepay February 2018 property tax and Q4 2017 state income tax before 12/31/2017
- Law limits deduction of property tax and state income tax to a TOTAL of $10,000 starting 01/01/2018. Note: You can’t pre-pay 2018 state income taxes (only Q4 2017 State Income Taxes normally due 01/15/2018).
Tax Tip #2 – Still get healthcare coverage for 2018
- The healthcare penalty is still in effect through 2018 and won’t be eliminated until 2019.
Tax Tip #3 – Last chance to deduct your employee expenses
- Deductions for Unreimbursed Employee expenses (Itemized Deductions) such as auto mileage, cell phone, union dues, scrubs, and seminars have been eliminated starting 01/01/2018. For example, if you drive from office to a client site and back to the office, you can no longer deduct these miles on your personal tax return.
Tax Tip #4 – Prepay moving expenses
- Prepay moving expenses before 12/31/17. Deductions for moving expenses have been eliminated starting 01/01/2018
Tax Tip #5 – Fund 529 Plans
- Previously, 529 Plans were designed as college savings vehicles similar to a Roth IRA. 529 Plans can now be used to pay for K-12 schooling. The contributions are still not deductible, but the gains are tax free. Contribute up to $14,000 for 2017 ($15,000 for 2018) per child as a tax-free gift.
Tax Tip #6 – Get your divorce finalized before 12/31/2018
- Alimony is no longer deductible for divorce agreements signed after 12/31/2018 so you have a year to get ready. Alimony is still deductible for existing divorce agreements.
Tax Tip #7 – Reduce entertainment expenses (Affects Self-Employed)
- Meals and entertainment are what made being self-employed fun. While meals are still allowed at 50 percent, entertainment is no longer deductible (i.e. no more sporting events, renting out movie theaters, night clubs)
Tax Tip #8 – Reduce de minimum fringe meals (Affects Self-Employed)
- Say goodbye to the 100% deduction of free meals for employees provided by onsite facilities as seen in Google and Yahoo. Employees still get tax free meals but companies can only deduct de minimus fringe meals at 50 percent.
Tax Tip #9 – Delay buying car until after 01/01/2018 (Affects Self-Employed)
- Car depreciation deductions have tripled from $3,160 to $10,000 for first year.
Tax Tip #10 – Considering starting a small business
- Many of the tax breaks came through for small businesses such as lower tax rates, 20 percent deduction of pass-through profits, elimination of corporate Alternative Minimum Tax, higher expensing limits for cars, expansion of bonus deprecation to new and used equipment.
- If interested, call to schedule consultation with Eddy to see if this would work for you:
Eddy Cheung, CPA
Legend Tax APC
7909 Painter Ave, Whittier, CA 90602
Click below for a good article from CNN summarizing the tax changes.
The goal of the new tax law was to give most taxpayers some form of tax cut with lower tax rates. However, depending upon your tax situation, your specific taxes could increase. In particular, the limitations on the property tax, state income tax, and mortgage interest to $750,000 loan could be result in higher taxes if you have multiple homes or high state income taxes. Here’s a good article on how the new tax law affects different tax situations.