So by now you have surely heard that The Tax Cuts & Jobs Act Of 2017 has passed and major changes are on the way. Unfortunately, if you live in a high-income-tax state (like New York or New Jersey) you will probably be paying more in taxes. So, what can you do?
The new $10,000 cap on state and local income tax and property tax deductions will be especially painful. What’s even tougher is that this limit is on the combined total of property and income taxes, not $10,000 each. Also, the $10,000 limit is for both individuals and married couples (it’s not $20,000 for a married couple).
While the dollar amount of state and local income tax and property tax deductions that can be taken drops, the standard deduction rises (standard deduction will be $12,000 for individuals and $24,000 for married couples). So, you will need to now focus on the timing of your itemized deductions in order to maximize their effectiveness. In some cases it may make sense to itemize one year, then take the standard deduction the next, and switch back the following year. This could be accomplished by doubling on charitable donations in a calendar year.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Let’s take for example a married couple who lives in and owns a home in New York and donates $10,000 every January to charity. In the past, that amount, combined with their local income and property tax deductions, made it easy for them to eclipse the old standard deduction.
Now, with the $10,000 cap, itemizing may not be a possibility. However, if they decided to move that January 2019 planned contribution to December 2018, they would now have enough where itemizing made sense for 2018. Then in 2019 they could take the standard deduction, because they would not be making a charitable contribution in the calendar year. They would then continue to double up on their charitable giving in 2020 to once again itemize.
It’s nice to know that doing good for others with your charitable donations can also possibly do some good for your own bottom line. And it’s just one example of a strategy to keep your taxes in check in the new tax world.
-
How to Keep Your Work Friends After You RetireWork friendships can boost teamwork, lift your spirits, and make the job more fun. But when you retire, these friendships can fade. Here's a look at why that happens and what you can do about it.
-
DexCom, GE, SLB: Why Experts Rate These Stocks at Strong BuyWall Street gives these three diverse names Strong Buy recommendations with high potential upside.
-
Here's Why Munis Aren't Just for Wealthy Investors NowBuyers of all levels should be intrigued by municipal bonds' steep yield curve, strong credit fundamentals and yield levels offering an income buffer.
-
I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love LetterSpecify your preferences in this personal document that shares your wishes on how you want to be remembered and celebrated. Your family will thank you for easing an emotional time.
-
The Future of Financial Advice Is Human: Gen Z Trusts Advisers, But AI Skills MatterGraduates entering the workforce trust human advisers more than AI tools with their financial planning. But AI can still enhance the client/adviser relationship.
-
I'm a Wealth Adviser: If You're a DIY Investor, Don't Make These Five MistakesEven though you may feel confident because of easy access to investing information, you may be making mistakes that could compromise your long-term performance. Here's what you should know.
-
Building a Business That Lasts: The Critical Steps to Avoid Blunders'Another Way' author David Whorton offers advice on how to build an 'evergreen' business that endures by avoiding common pitfalls that can lead to failure.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock BasketLimit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
-
Should You Claim Social Security Early or Late? A Financial Adviser Weighs InThere isn't a wrong age to start claiming Social Security, but there are factors that everyone should consider to avoid leaving money on the table.
