As we inch closer and closer to tax reform, it is important that taxpayers maximize any benefits that they may lose with the potential reforms in 2018. One common deduction that is going away is the itemized deduction for state and local tax payments.
Under current tax law, taxpayers can take a deduction on their Schedule “A” (itemized deductions) for state and local taxes paid in the current year. Under both the House and Senate’s versions of tax reform, this deduction is going away and there is a possibility that any state and local taxes that you pay after December 31, 2017 will no longer be deductible on your personal income tax return.
Therefore, we are recommending that all our clients pay their state and local 4th quarter estimated payments by December 31, 2017 instead of on the due date, January 15, 2018. This will allow you to get a federal tax deduction for your 4th quarter state and local payments. If you wait until January to make the estimated payments, you may never get the deduction. This allows you to maximize your itemized deduction for state and local taxes before it is gone with tax reform.
Have more questions? Please feel free to contact Charles Eisenhart, Tax Manager with McKonly & Asbury at CEisenhart@macpas.com.