Are home Equity Loans Tax DeductibleCan Home Equity Loans be tax deductible?
Tax plan 2017 at the end of the year with regard to the tax reforms
On Friday, three and a half months before the date he appointed himself and Congress, President Donald Trump signed the Tax Cuts and Jobs Act of 2017 ("TCJA" or the "Act"), which implements the House and Senate tax reforms that have been drafted and adopted according to partisan principles.
Some of the new tax rules have already entered into force with the signature of the Act by the President (the "Effective Date"), while most of its rules will not enter into force until 1 January 2018. This is why the vast bulk of the enquiries we have on the new tax legislation ask ourselves what measures our customers can take before the turn of the year to minimise their tax liabilities for 2017 and 2018.
Therefore, our top policy is to ensure that our customers know what actions they should take before 1 January 2018. Our second client preference is to challenge the terms of the new Act that will affect them in 2018 and beyond. Our focus on prioritizing questions that arise from the TCJA is also very useful to us, especially as tax payers now have less than four (4) working day and less than two (2) working day to take positive steps for tax budgeting in 2017, or to loose many overall budgeting choices.
And the importance of the 2017 scheduling date is even more important for our customers, who would rather be enjoying the College Football Playoffs this year than spending that amount of money resorting to tax deduction and tax scheduling policies that can or can't pass the IRS audit. Therefore, this Burr Alert has been developed to help us pinpoint and target those tax budgeting policies that we believe will have some validation and profitability if adopted before 1 January, i.e. before the new rules of the TajA come into force.
In January, we will then begin publishing a number of Burr Alerts describing the tax changes that the TCJA will make to our mandates in different sectors, to our mandates with different legal/tax structure (for tax planning) and to our mandates tightly linked to a particular form of tax (e.g. foreign taxes and inheritance tax).
I. Prepaid allowances in 2017 that will be capped or waived by the 2018 tax reform. The TCJA, as a compromise for double the standard withholding tax and the reduction of personal tax rate, often restricts and removes certain single withholding tax credits; for example, as of January 1, 2018, the withholding tax for state and municipal income tax ("SALT") is restricted to $10,000 per year and almost all other single withholding tax credits are removed.
In addition, interest on residential loans will be restricted to the first $750,000 from January 1, 2018. 100 of the Chief Executive Officer (although all existing pre-January 1, 2018 loans were acquired at the $1 million level). In recent week, Forbes' favorite Wall Street Journal postings have featured article indicating that most tax payers should use sanity that if a tax relief is to be abolished or caped in 2018, the tax payer should pay in advance in 2017 as many of those "lamella" tax relief payments as long as they are still deductible.
Whilst the alternate tax threshold ("AMT") is likely to become insignificant for the vast majority of persons submitting 2018 together (the AMT waiver has been raised to $109,400 and the exit threshold has been raised to $1,000,000,000 below the TCJA), the prepayment of certain line item such as property tax, state personal tax and other individual deduction if you are or will be liable to the AMT for the 2017 tax year as a result of such payment cannot offer a reasonable tax advantage.
However, there is probably nothing to loose by making your last state personal tax for 2017 worth your estimate of tax payments and pay all 2017 property tax before the end of the year. However, we strongly advise our customers to discuss the implications of the AMT with their AMT provider's representative before they pay a tax relief in 2017 that will be limited or abolished in 2018.
Advance payment of state taxes on incomes 2018. In fact, some TV, print and broadcast professionals are suggesting that tax payers should pay state taxes in 2018 and deduct them in 2017. Think you currently pay personal taxes on incomes you haven't recieved or deserved?
When there is no clear obligation for this tax, there is no deducuction; these contributions are optional contributions under tax legislation. Don't pay state personal tax in advance for 2018 and anticipate that this amount will be deductible. The IRS took the rarely used measure of releasing an IRS Advisory (IR-2017-210, Dec. 2010) as a seeming reaction to the very open effort of a number of tax advisers and commentaries by some celebrity state officials to bypass the $10,000 limit on SALT allowances introduced in 2018 by prepaying their 2018 and in some cases 2019 land tax.
27, 2017), which states that the eligibility of 2018 land tax paid in advance in 2017 is successful or will fail, depending on whether those tax were actually levied before 2018. Accordingly, tax payers should consult their tax advisors before considering that the advance payment of land tax in 2017 will be advantageous.
Deductibility of interest in home loans. After the tax reform, interest on home ownership loans and line of credit will no longer be deductible from 2018. Therefore, tax payers should consider repaying such loans and any interest due before the end of the year. A further practicable policy for some tax payers will be to re-finance the initial mortgages and all home loans still owed into a new mortgages (as long as the aggregate amount of indebtedness does not breach the $1 million limit) to make sure that all interest on mortgages will be deductible from the date the new regulations enter into force in 2018.
Deductible? As with many other allowances, the movable allowance will be removed after 1 January 2018 (except in the case of armed forces). The best thing to do if you are on the move is to move the trial forward in 2017 to be able to recover the relocation costs mentioned above. Put earnings on hold? As top tax levels fall by 3% to 4.6% for many working parent double parent households, many tax payers may be inclined to postpone bonuses and other revenues to 2018 instead of taxing them for 2017.
In the event of a deferment of payment which accidentally infringes section 409A of the Code, tax, fines and additional interest in the total amount of 65 to 70% of the suspended remuneration may be incurred. V. Charity deductions. Within the framework of the TJC, the non-profit withdrawal is maintained and even extended. However, for many SME tax payers, the issue is whether in 2018 they will be able to make use of the extended non-profit tax allowance (the increase in the amount of the default tax allowance may lead to a better tax computation for such taxpayers).
Because nonprofit deduction is much less likely to cause other tax issues (such as an AMT commitment), some individual may find it beneficial to bundle 2017 and budget 2018 nonprofit deduction, both of which pay before year end. One year of the President's tax reform efforts focused on reducing the "uncompetitive high" corporation tax in the US and reducing the tax burden on transitory revenues.
According to the CJHA, the highest corporation tax will be lowered from 35% to 21% from 1 January 2018. In 2018, a new 20% deductible from qualifying operating revenue will be available for transit companies, i.e. unincorporated firms, S-corporations and LLC's (note that unfortunately this deductible will be severely restricted if the trade tax payer is a successfully specified servicing company; e.g. healthcare, legal, accounting, finance, visual art and any company where the most important assets are the reputations or abilities of employees or owners).
In order to postpone the revenue or not? As with the various tax payers, part of the compromise to achieve these lower commercial tax levels was to limit and/or eliminate certain corporate tax levies. Therefore, the choice for corporate finance managers and tax experts is whether to postpone revenue recording to 2018 if a tax payer is on a spot payment footing (and, to the possible extent, even if he is on a deferred basis) regardless of the nature of the enterprise; does the delineation mean that less tax is payable on a cumulative footing?
Once again, Burr Forman is advising its corporate customers to consult their respective CPAs to see whether a revenue delimitation is a good policy for the company and its shareholders. Even the law itself, adopted by the House and Senate on Friday 22 December 2017, is almost 500 pages long, and when the Conference Committee leaders, who discussed the definitive conditions of the law, made their statement on its regulations, that statement was almost 570 pages long.