SAN FRANCISCO (KPIX 5) — The new Republican tax law is prompting lots of people to try and get ahead of the game to maximize their deductions in 2018.
In only ten days, Californians will have some dramatically different tax rules.
The state and local tax deduction will be capped at $10,000. That means paying state taxes now — before the cap kicks in — may be the smart move.
In fact, KPIX 5 learned it’s already happening.
“We send out bills in October. And you get the bill for the entire year of 2017 and you can pay it in two discrete installments: the first one by December 10 and the second one by April 10,” explained Amanda Kahn Fried, Policy and Legislative Manager for the San Francisco Treasurer’s Office.
To deduct state property taxes in 2017, you have to pay them in 2017. That means not waiting until April of next year.
Kahn Fried said they’ve already seen a 9 percent increase in the number of people paying their full tax bill now, shelling out a total of $41 million.
“Certainly we were surprised at the $41 million number,” said Kahn Fried. “That it’s increased that much over last year.”
When it comes tax law, attorney Rob Wood has literally written the book. He can’t give legal advice through this story, but he says the law seems to allow people to pay 2017 taxes early.
“I think everyone’s scrambling,” said Wood. “If it is 2017 income taxes that you’re paying, my read of the law is that is okay. It’s quite clear. If it is 2018 taxes you’re paying, it’s not okay.”
This also goes for state income taxes.
With tax brackets changing, he said California residents should think about making charitable donations now.
“People in general are better off making a donation this year than they would be next year,” said Wood.
Next year, there will be a new, lower tax rate for certain revenue streams. People who have qualifying income should think about creating a company so they can enjoy that lower tax rate
“For your regular person, one of the biggest changes, I think, that’s going to ripple across business and a lot of households, is the so-called pass-through income or flow-through income,” said Wood.
Even very small businesses could benefit.
“A lot of jockeying, I think, is going to be over who qualifies,” said Wood. “And many little businesses run out of somebody’s garage are going to qualify, I believe.”
Some ideas to discuss with your tax professional include:
- Pay 2017 state and local property taxes before December 31.
- Pay 2017 state income taxes before December 31.
- Donate to charity by December 31
- See if creating a corporate entity will help you in 2018
Alameda County is actively encouraging people to pay their property taxes early. On Thursday, a Santa Clara County supervisor sent out a press release saying the same thing.
However, the San Francisco Treasurer’s Office wanted to be clear that paying taxes early may not be the best solution for everyone.