Aarti Kapadia, CPA/MBA, provided these simple tips for individual tax filers. This is not tax advice specific to you, just general information to discuss with your own tax team.
Last Minute Tips for Individual Tax Filers
1. The SALT (state and local income tax deduction) is limited in 2018. We recommend you consider prepaying your 2017 state and local income taxes.
2. We also recommend you consider prepaying the 2nd half of the assessed property taxes for 2017 that are due in 2018 for principal residence or second home.
ARIZONA SPECIFIC: Maricopa county residents can prepay these assessed property taxes at the link below (search for your property at the link below, select the parcel number to view details, and select View/Pay Tax Bill). Please be sure you notify your mortgage company of the prepayment. https://mcassessor.maricopa.gov/
3. With tax brackets and corporate rates going down in 2018, push business income to 2018, and recognize any business losses in 2017. There is an additional 20% deduction available for certain pass through businesses. Certain specified service trades or businesses may not fully qualify for this deduction unless the taxpayer’s taxable income is below a certain threshold.
4. Prepay investment expenses and tax preparation fees for 2017 since these deductions are not deductible in 2018.
5. Pay job related moving expenses in 2017. This deduction is eliminated in 2018.
6. Rates for unearned income for children go up in 2018. We recommend accelerating this income to 2017 if possible.
7. Arizona residents have a great opportunity to lower the state income taxes by making charitable contributions that are eligible for a dollar for dollar tax credit. Here are some of the most popular contributions that are eligible for a dollar for dollar tax credit
a. Qualifying Charitable Organizations tax credit (up to $400 for single/ head of household or married filing separately and $800 for married filing jointly)
b. Qualifying Foster Care Charitable Organizations tax credit (up to $500 for single/ head of household or married filing separately and $1000 for married filing jointly)
c. Public School tax credit (up to $200 for single/ head of household or married filing separately and $400 for married filing jointly). You may claim a credit for making contributions or paying fees to a public school for support of extracurricular activities or character education programs. The public school tax credit is claimed by the individual taxpayer
d. Private School tuition organization credit (up to $1089 for single/ head of household or married filing separately and $2177 for married filing jointly)
Things to note for 2018 for Individuals
1. Individual tax rates have changed, with rates going down from 1-4%.
2. AMT (Alternative Minimum Tax) is still in effect but the exemption limits went up from $86,200 to $109,400(married) and $55,400 to $70,300 (single).
3. Standard Deduction went from $13,000 to $24,000 (married) and $6,500 to $12,000 (single). The standard deduction is IN LIEU OF the Itemized Deductions.
4. Itemized Deductions: Deduction for SALT (State and local taxes) limited in 2018 to a total of $10,000 for property and state taxes. Miscellaneous Itemized deductions that were subject to 2% of AGI no longer allowed.
5. Personal exemption of $4,150 per person repealed completely.
6. Mortgage Interest deduction changed from $1M to $750k for principal residence and second residence combined. Rental properties not affected. HELOC interest deduction no longer deductible.
7. New 20% deduction for qualified business income from a partnership, S Corporation or sole proprietorship – limits apply.
8. Gift/Estate tax exemption is doubled from %5.6M to $11.2M
9. Child tax credit increased from $1000/child to $2000/child. Phase-out of credit changed from $110,000 (married) to $400,000.
10. Individual health insurance coverage requirement/penalty repealed.
About the author: Aarti Kapadia, CPA, MBA, is a principal at A.K. Accounting and Tax PLLC in Phoenix, Arizona. For more information reach her directly at (602) 324-9674 or at AartiKapadiaCPA@gmail.com