THURS, DEC 21st, 2017
As you have likely seen in the news, The Tax Cuts and Jobs Act was passed by both the House and the Senate this week. This bill is widely expected to be signed into law by President Trump. The bill brings important changes to most American families – likely including yours.
At Albion Financial Group, we are not accountants nor are we attorneys. However, as a financial advisor, we want to make sure you are aware that this bill likely impacts you and that there are year-end actions that may be financially beneficial. Most importantly, we want to encourage you to call your accountant. Your accountant is in the best position to advise you on how the bill impacts you and what moves, if any, you should consider prior to year-end.
This Wall Street Journal article from December 19th contains an excellent summary of the ways the bill will impact many American families. The article is both descriptive and prescriptive – offering an excellent summary of the bill’s salient points while providing prescriptive year-end moves to consider. It is a short article and we encourage you to read it in its entirety. Below we highlight two of the article’s suggestions because of their broad application:
1) The tax benefit of charitable donations made in 2018 might not be as meaningful as those made in 2017. One way to obtain a 2017 charitable deduction is to open and fund a donor advised fund account. Donor advised fund accounts allow you to make a charitable donation in one year and to delay the ultimate decision as to which charities to support until later years. Please call the wealth advising team Albion Financial Group at (801) 487-3700 if you would like more information on donor advised fund accounts, and, please call your accountant for their own advice on this topic. Be aware, most custodians apply “best efforts” in late-December meaning they cannot guarantee to have donor advised fund accounts open and funded in time for a 2017 tax deduction.
From the hyperlinked article: “Currently about 30% of filers, or 45 million, itemize their deductions. The pending change will cause perhaps 20 million or more of them to switch to the standard deduction. Many will be married couples, as the new $10,000 cap on state and local tax deductions is per return, not per person. The bottom line is that affected taxpayers will no longer get value from deducting charitable donations.
2) The bill caps deductions of state and local income tax or sales and property taxes at $10,000 per return. Please read the article for important implications for families that are subject to alternative minimum tax (AMT) and be sure to discuss this with your accountant. Below are two year end strategies from the article that we want to highlight.
a) You may want to make sure you have fully paid any state income tax you will owe for 2017. In most years, some taxpayers choose to pay as little state income tax as permissible and then make a final payment to the state when they file their taxes in April of the following year. This year you may want to fully fund your 2017 state tax liability because of the $10,000 cap that applies for state and local income taxes paid in 2018.
b) If you own your primary residence, you may want to prepay your 2018 property tax. We are fortunate in Utah that most counties will accept prepayment of property tax. If, after talking with you accountant, you would like to prepay your 2018 property tax, you can do so by contacting your county treasurer. Below we share useful county websites and phone numbers to learn more and to prepay your 2018 property taxes online.
i. Salt Lake County Treasurer (385) 468-3000
ii. Summit County Treasurer (435) 336-3267
iii. Utah County Treasurer (801) 851-8255
We hope this blog post proves useful. We wish we could have published this post earlier but we felt it prudent to wait until the tax bill passed both the House and the Senate. We hope you understand and agree. As always, please call us at (801) 487-3700 if we can be of assistance with tax strategies or any other financial planning question.
Doug Wells, CFP®, CFA®, MBA / Partner
Albion Financial Group