As the year ends, we are finding more planning opportunities and questions. Here are some of the common questions and items we are coming across:
Real Estate Taxes – Should I pay ahead in December or defer to the bill’s due date or pay monthly via escrow? Answer: It really does not matter anymore. You will be either taking the standard deduction this year or will be limited to $10,000 in state, local & real estate taxes.
If your state, local & real estate tax deduction will be capped at $10,000, prepaying your state estimated taxes in December is no longer beneficial either. You should pay at least $3,000 annually to get the $300 Wisconsin property tax credit.
Charitable Contributions – Are my contributions going to be deductible? It depends. The standard deduction is now $12,000 (S) $24,000 (MFJ). If your state, local & real estate taxes (capped at $10,000), mortgage interest paid, and charitable contributions do not exceed $12,000 (S) $24,000 (MFJ) you will not get a tax benefit from the contribution.
Many large donors are bunching or “doubling up” on their charitable contributions to receive a benefit. Another way to do this is set up donor advised fund with your financial advisor or manager.
Business Owners: Defer Income & Accelerate Expenses - If you are having a profitable 2018, it may make sense to prepay any upcoming expenditures or try to spend down your income with necessary capital equipment or fixed assets. It also makes sense to hold off on invoicing or collecting from clients until January to recognize the related income in 2019.
Favorable Depreciation: For profitable businesses it could make sense to make necessary asset purchases and improvements before year end. The IRS has changed the rules that generally all new, used equipment and qualified leasehold improvements can be “written off” or expensed using “bonus” deprecation.
As a reminder, Form 1099-MISC should be issued to independent contractors, employees, and attorneys for services paid to a non-corporate entities over $600. These forms and filings are due January 31, 2019. Please submit this information to our office so we can assist.
We are in the process of printing and mailing out the 2018 tax organizers. If you would prefer to have a pdf version e-mailed to you, which you can print at your convenience, please reply to this e-mail by Friday, December 28, 2018. If you would rather continue receiving a paper copy, we expect them to go out the week of January 7, 2019 and no reply is necessary.
We appreciate our relationship and we thank you for your continued business and support this past year. We wish you and yours a Merry Christmas and Happy New Year!
Dave, Joanie, Melodi, Bill, Dan, Brian & Jeff