www.MarinoLaw.com (773) 775-0707

Tax Reform – What to do NOW (updated December 13, 2017)

I know there are three things in life that are certain: Death, taxes, and annual increase in health insurance premiums by double digit percentages.

 

Tax reform is bouncing between the houses of congress, 497 pages at last count, not including the handwritten edits. The current drafts will increase the standard deduction to $24,000, remove all personal exemptions (family of four loses $16,000 in exemptions), eliminate the deductibility of state tax paid and limit the deductibility of real estate taxes paid on your principal residence.  The actual changes are still being negotiated (ie. mortgage interest for 500k loan may increase to 750k loan), so we won’t really know until we know!

 

We can’t do much until/if passed, except prepare: arrange and be ready to pay real estate taxes not yet due. So far, tax reform proposed includes a $10,000 limitation on the deduction for real estate taxes on your home. Also, if you pay estimated state tax payments, you should consider paying the last installment (due Jan. 15, 2018) in December, as the deduction for state taxes is also projected to be eliminated.

 

Current law allows you to write off the full amount of property and state income taxes paid, although other parts of the tax code — i.e., the alternative minimum tax — can reduce or offset the benefit of the deduction. For homeowners who will not be subject to the AMT, however, prepaying not-yet-due property taxes this year may capture the value of the deduction which may be lost in tax reform.

 

Assuming a new law is passed and depending on your specific situation, it might be a good idea to be prepared to pay some or all of the 2017 real estate taxes this year (rather than when due in 2018).

 

Cook County has graciously made the 2017 1st installment bill (55% of the full 2016 bill) available to pay now – look here: https://www.cookcountytreasurer.com/

DuPage County – look here: http://www.dupageco.org/Treasurer/1831

Lake County – look here: http://www.lakecountyil.gov/faq.aspx?qid=321

 

If you pay your taxes through a mortgage lender escrow, you will need to contact the lender to arrange early payment in December for you (presuming your escrow balance is sufficient), or pay the bill yourself and direct the mortgage lender to not pay in March.

 

Of course, consult your tax advisor to determine the possible impact on your specific tax situation, including the extent of the application of the alternative minimum tax as a result of the increased deductions. However, in any case, you want to be ready to pull the trigger on real estate and/or income tax payments in 2017 depending on how the final tax bill treats those deductions for 2018.

 

Speak Your Mind

*