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As of the end of the first week of December, the United States Senate and House of Representatives have not reconciled the differences between their two versions of the Tax Cuts and Jobs Act. One of the issues contained in both versions is their proposed changes to the individual itemized deduction for non-business taxes paid. Since the inception of the individual income tax in 1913, a deduction for these taxes including state and local income, sales and property taxes has been allowed in the U.S. tax code. However, in each version of the Act, beginning in 2018 individuals who itemized will only be allowed to deduct up to $10,000 of property taxes.
This potential change in the tax law is requiring taxpayers to consider when they should pay any 2017 state income taxes they may owe. If a payment is made before the end of 2017, the amount might be deductible in 2017. If paid in 2018 when the state quarterly estimate is normally due and when the 2017 return is filed and if this Act passes as is, the payment would be nondeductible.
What should a taxpayer do? What factors should be considered in making a decision on when to pay?
Here are some of the items you should consider in making the decision:
No clear cut answer exists and the right option varies with each taxpayer. Please contact your P&N tax advisor before year end to see which alternative is the proper plan for you.