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It is anticipated that the GOP tax reform will be become law this afternoon. In anticipation of that I was doing some last minute 2018 tax planning as it applies to deductions.
Currently my joint return (for 2017) shows a reduction in AGI of 23,300 (Standard deduction plus personal exemptions). Media reports say that the joint 2018 Standard deduction will double to 24,000 and the personal exemption is eliminated. By my calculation (for me) that is a net change of 700 dollars (+3%), not 12,000 (+100%).

Whether or not the standard deduction doubles or not is insignificant, what matters is the change between AGI and Taxable Income for those of us who do not itemize or have to decide whether to itemize of not.

Is there something I'm missing in the status of reduction of AGI in 2018 that would cause me to (for example) prepay charitable contributions or property tax?

I'm not sure how to do this, but the answer to this question is provided in another SE question specifically: Stack exchange question - elimination of additional Std. Deductions

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  • Good question with a well-formulated tie-in to relevant timely advice request.
    – Grade 'Eh' Bacon
    Dec 20, 2017 at 16:01
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    "Whether or not the standard deduction doubles or not is insignificant, what matters is the change between AGI and Taxable Income for those of us who do not itemize or have to decide whether to itemize of not." Well, for deciding whether to itemize or not, what matters is the change in the standard deduction (as well as changes in certain itemized deductions like the SALT deduction) because it's whether the standard deduction or itemized deductions is higher that determines whether you itemize or not. The elimination of exemptions is the same no matter whether you itemize or not.
    – user102008
    Dec 20, 2017 at 16:25
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    I don't follow your question, you don't itemize, but are asking about prepaying property tax or making charitable contributions. What impact would that have if you don't itemize?
    – Hart CO
    Dec 20, 2017 at 18:30
  • @Hart CO- I DO itemize, however my itemized deductions are just over the threshold of 2017 standard deduction. However, because the standard deduction amount is increased for 2018, I likely (barring unforeseen circumstances) would not. So my gut tells me that prepaying charitable contributions to increase my itemized for 2107 works to my benefit in reducing my taxable for 2017. All that said, that's not my question. My question is: What is the status of AGI reductions (that "space" between AGI and Taxable Income in the tax reform law?
    – BobE
    Dec 20, 2017 at 21:50
  • I disagree with 'last minute' in this question. This new tax legislation is for the 2018 tax year which has not begun.
    – Xalorous
    Dec 20, 2017 at 22:34

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If you expect to use the standard deduction in 2017, then you likely won't want to do anything: not much changed for you, really. They took the $8100 personal exemptions you had before, and removed them, and took the $12700 standard deduction you had before and added $11300 to it. So you should see an decrease of $3200 in income from your taxable income (or an increase of $3200 in income excluded from your taxable income). If you're only seeing $700, then you have another $2500 above the line excluded income; depending on why that $2500 is excluded, you may or may not still get that exclusion.

The purpose of this was not to significantly decrease your AGI exlusions; rather, the purpose of this was to simplify taxes for many people who currently itemize in the old system but would not in the new system. Not having to itemize means a much simpler filing process (such as the ability to use a simpler form, possibly), and the addition of $3200 to the total is intended to make up for some of the itemizing. (This doesn't mean it will be equal for all parties, of course, nor that I am defending the idea, simply providing the stated rationale.)

If you are, in 2017, on the border of itemizing or not, and do have the ability to shift property tax payments from 2018 to 2017 (or other deductions), it's possible you would benefit by doing so. You should only do so if your 2017 taxes will be reduced, however - you shouldn't consider the 2018 taxes for this purpose; they're likely fixed regardless of your choice (if you indeed take the standard deduction now, you'll certainly want to in the future if your financial situations stays the same).

Most of the people who would benefit from shifting property tax payments from 2018 to 2017 are people like me who currently itemize (in 2016 and 2017) but will likely not itemize in 2018.

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  • your first paragraph pinpoints my question. My 2017 standard deduction is 15,200. It IS 2,500 more than the "standard" Standard deduction, because my wife and I are both over 65. So what I want to know, is does the new Tax law retain that "over 65" exemption or (because it's obviously a "personal" - did that get dropped with the Personal Exemptions. I've called both of my GOP senators and their offices say "we don't know"
    – BobE
    Dec 20, 2017 at 22:03
  • @BobE That's an interesting question, and should be answered separately. I will add a spoiler: Hart is wrong by my reading. And further - it is a deduction (originating from section 63) not a part of the personal exemption (originating from section 151), despite its usage of the language "exemption" in parts.
    – Joe
    Dec 20, 2017 at 22:50
  • @Joe In the bill I see "(2) Section 63 is amended by striking sub sections (f) and (g)." And (f) is what grants an additional amount for the aged. Thought it was pretty straightforward, what am I missing?
    – Hart CO
    Dec 21, 2017 at 0:21
  • Not on my PC with the link, but the conference report said that only the house version included that.
    – Joe
    Dec 21, 2017 at 0:22
  • Unless you see the final bill and they changed it again? (There were a few minor changes which was why the house had to vote again.)
    – Joe
    Dec 21, 2017 at 0:24

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