3. State and Local Taxes.
Determine whether you have state income taxes due next April, by doing your 2017 preliminary computation, and make an advanced estimated payment by December 31. Since Congress might dump the state tax deduction in 2018, you might as well get it in 2017.
You could end up losing the deductibility through something called the Alternative Minimum Tax (AMT). The AMT is a second tax calculation that mitigates the income and real estate deduction, so you need to not over-do-it.
4. Use your tax brackets to your best advantage.
While looking for deductions, don’t go crazy trying to beat the tax man. Paying for unneeded tax deductible items will burn cash wastefully.
As a business owner, cash is king. So, keep a balance between preserving your cash, and avoiding or reducing your tax bill. Some taxpayers feel it is most important to get their tax to zero, and will do anything to achieve that aim.
This is generally a foolish strategy if your plan creates a significant tax liability for the following year. Remember that the tax rates start from a small percentage to a larger one. The best strategy is to seek the lowest tax bracket in 2017, while leaving some deductions and expenses for deduction in 2018.
Spread the tax savings over two years, in a balanced way.
5. Capital Gains:
One last word.
You may be uncertain whether to close a big stock or real estate transaction that might have a big gain in the current year, 2017. The standard rule is to defer until the next year, 2018. Generally, you can’t lose because, if Congress reduces tax rates in 18, you win.
And, if they leave it the same, you still win because you have a whole extra year to pay the gain tax.
Finally, remember to consult with your CPA or tax advisor before concluding and executing on any strategy.