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in case you were thinking about it, the NYT says you can't prepay 2018 state and local income tax
That's literally correct. This was added to the conference agreement (it wasn't in the House or Senate version):
The conference agreement also provides that, in the case of an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, the payment shall be treated as paid on the last day of the taxable year for which such tax is so imposed for purposes of applying the provision limiting the dollar amount of the deduction. Thus, under the provision, an individual may not claim an itemized deduction in 2017 on a pre-payment of income tax for a future taxable year in order to avoid the dollar limitation applicable for taxable years beginning after 2017.
This doesn't seem to preclude your overpaying your 2017 estimates. That will increase the state refund you get in 2018, which will increase your taxable income (and AGI) for that year. This could still help some people who would be taxed at a lower rate on that 2018 refund. However, increasing AGI could have some deleterious effects like increasing the threshold for medical deductions (assuming one can still itemize), making more of SS taxable, etc.
Note also that the IRS requires that there be some reason for making the higher estimated payment beyond tax avoidance. Otherwise it will disallow the deduction.
The bill also prevents taxpayers from prepaying their state income taxes this year to avoid paying more in 2018. It says nothing about prepaying property taxes.
One of the quirks of the bill that I've seen mentioned nowhere is a side effect of the alimony change on the alimony recipient. The payer will no longer be unable to deduct the payments. The flip side is that the recipient will no longer owe income tax on alimony.
You can contribute to an IRA no more than your total compensation, which currently includes alimony. But if alimony becomes non-taxable to the recipient, it will no longer count toward what you can contribute to an IRA. That's the side effect.
Comments
This doesn't seem to preclude your overpaying your 2017 estimates. That will increase the state refund you get in 2018, which will increase your taxable income (and AGI) for that year. This could still help some people who would be taxed at a lower rate on that 2018 refund. However, increasing AGI could have some deleterious effects like increasing the threshold for medical deductions (assuming one can still itemize), making more of SS taxable, etc.
Note also that the IRS requires that there be some reason for making the higher estimated payment beyond tax avoidance. Otherwise it will disallow the deduction.
The bill also prevents taxpayers from prepaying their state income taxes this year to avoid paying more in 2018. It says nothing about prepaying property taxes.
More here:
https://www.consumerreports.org/taxes/new-tax-bills-winners-and-losers
Heloc interest can no longer be deducted, alas.
One of the quirks of the bill that I've seen mentioned nowhere is a side effect of the alimony change on the alimony recipient. The payer will no longer be unable to deduct the payments. The flip side is that the recipient will no longer owe income tax on alimony.
You can contribute to an IRA no more than your total compensation, which currently includes alimony. But if alimony becomes non-taxable to the recipient, it will no longer count toward what you can contribute to an IRA. That's the side effect.
https://taxfoundation.org/map-state-and-local-deductions/
depreciating academe and expertise is key!
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