Every year in late December, I evaluate whether to pay my real estate taxes before December 31 or wait until the due date. In the past, this was strictly related to cash flow and accelerating deductions. This year, a new factor was involved: Under Public Law 115-97, or the Tax Cuts and Jobs Act of 2017 (TCJA), effective for the 2018 tax year, the state tax deduction is limited federally to $10,000 ($5,000 for individuals and those married filing separate). So, this year I also had to review my pay statement for state income tax withholding. This law was passed in 2017, but the provisions are effective for 2018-2025.
As wage earners, this is simple for my wife and me. However, the real challenges are for individuals who own entities taxed as S corporations and partnerships. The income is not taxed at the entity level but rather at the owner level. Many financial institutions are taxed as S corporations, so this has been a tax challenge for them for 2018. Read full article.