The House Ways and Means Committee has just released a proposed tax bill that is a long way from being enacted into law.
Many of its features are likely to be eliminated, modified or combined before a tax act is ultimately signed into law by the President. Nevertheless, here is one thing that is highly likely to save federal income tax based on the current proposals.
Most everyone expects the new law will reduce individual income tax rates, if only by a few percentage points. One controversial proposal in the tax bill is elimination of the deductibility of state and local income taxes by individuals.
To try to save taxes in this landscape, a person should pay as much of his or her 2017 state and local income tax as possible before the close of business on December 31, 2017. Therefore the deduction would fall into a year when the taxes are still deductible and those deductions would count toward a higher tax bracket.
Allowing those payments to occur in 2018 might mean no deductibility or deductibility against the lower tax rate.
We will keep our eyes open for other suggestions in this complicated and ever-changing scenario.
This post was written by LeRoy Metz.