‘Twas the night before Christmas, and all through the house, not a creature was stirring…, except for the family tax consultant, who was still figuring out what, if anything, her clients should be doing before the end of 2017.

In case you haven’t heard, or have, but are muffled in confusion about what it all means, there’s significant new tax legislation that’s passed, been signed into law, and that we all need to pay attention to, beginning immediately.

While I still haven’t made my way through the full text of the “Tax Cuts and Jobs Act of 2017”, I am quite clear that this will impact all of us on some level, starting now. Many of the deductions we’ve come to know and love have been eliminated as of January 1, 2018, and others may have lost any meaning after that date, depending on your situation. Here are a few of the items you may want to act on before next weekend:

1. The standard deduction is rising substantially for all taxpayers on January 1, 2018. If you currently itemize your deductions, 2017 may be your last year. Accordingly, if you were not in the Alternate Minimum Tax in 2016, you may want to
1. Prepay real estate taxes. Real estate taxes are assessed as of July 1 of each year, so you have likely only paid ½ of your 2017/2018 real estate taxes. If you have the money available and your taxes aren’t escrowed by your mortgage company, you may want to make the next one or two payments while we’re still in 2017;
2. Prepay your 4th quarter, 2017 state income tax estimate in December. If you wait until January, your deduction may be useless or limited;
3. If you know you’re going to make certain charitable contributions in 2018, if you have the money to do so sooner, make them now. Just be certain that you notify the charity that this is your 2018 contribution;
4. Prepay your tax preparation fees, safe deposit box rentals, and investment advisory fees for 2018 now, not later. These deductions disappear as of 1/1/18. If you’re unsure how much to pay for any of these fees, using last year’s fee as a baseline is a pretty safe bet;
5. The mortgage interest deduction is also changing.  Going forward, only the interest on the mortgage on your principal residence will be deductible.  No more home equity interest, no more interest on a second property. If you have a home equity loan, you may want to consider paying it down or off entirely. Also, for new mortgages written after 12/31/17, you will be limited to the interest on $750,000 of loan value, not the $1,000,000 that is currently in place; and
6. If you’re concerned that you may move from itemizing deductions in 2017 to taking the standard deduction in 2018, you may want to make an additional mortgage payment in 2017 to plump up your 2017 deduction.
2. Some items that were on the chopping block in various versions of this bill have been revived at the last minute. These include
1. The $250 deduction for school teachers who buy school supplies out of their own pocket;
2. The medical deduction has been improved, so that now all taxpayers will only deduct 7.5% of their Adjusted Gross Income from their total nonreimbursed medical expenses, not the 10% haircut for taxpayers under age 65 in 2016. The change to this deduction is retroactive to 2017 (yay!), but increases to 10% across the board in 2019 (boo!);
3. The state and local tax deduction still exists, but in a reduced form. Going forward, you’ll only be allowed to deduct $10,000 for state and local income and sales taxes. So, if you’re thinking of buying a new car, you may want to purchase it this week, when the sales tax on the purchase is still deductible;
4. Adoption tax credits were on the chopping block, but were added back in late in the process.
3. Some other items in the tax act that will impact your returns, either positively or negatively, include
1. The elimination of personal exemptions. The increased standard deduction will cover the loss of your exemption if you’re a small family; if you’re a large family, though, the increased standard deduction will not be adequate to negate the loss of your exemptions, although the increased child tax credit may rectify this;
2. The lowering of tax rates. Not all tax rates have been lowered, and the loss of certain deductions and personal exemptions may make taxable a higher percentage of your total income;
3. The individual mandate portion of the Affordable Care Act has been repealed for tax years beginning January 1, 2019. The means that, if you don’t have minimum credible coverage in 2018, you’ll still be liable for the tax penalty;
4. In case you were pondering divorce, the rules governing taxability of alimony is doing a 180-degree turnaround. Beginning in 2019, for divorce and separation agreements signed after 12/31/18, the amount of alimony will be taxed to the person paying the alimony, not the recipient. If you are contemplating a marital dissolution, and you will be the payor of any alimony, you may want to conclude the process in 2018, and not stretch it out to 2019. Even if you manage better terms if you wait longer, the tax hit over your lifetime may more than negate the better up-front provisions.

As I delve into all the minutiae of this new tax law, I will be updating you, either individually, or as a group (depending on how general the advice is), on items that will impact you, and that I think you should pay attention to. And, as I prepare your taxes for 2017, I will be looking at each return to make sure you are taking full advantage of everything that is available to you, not only in 2017, but also regarding your 2018 and forward tax returns.

Finally, while the Tax Cuts and Jobs Act of 2017 is now the law of the land, don’t expect this this to be the final word. The process to pass this piece of legislation has been incredibly rushed, and therefore, the consensus is that it is a very poorly drafted law, and there will be many, many technical corrections.  At the moment, however, this is what we have to go on.

I wish you all a very happy New Year, and that, taxes notwithstanding, you all have a safe, healthy, happy, and profitable 2018.