It appears that medical deductions will not be allowed under the new proposals. This means that for 2016, if you have significant medical expenses, more than 10% of AGI if you are under 65 or more than 7.5% of AGI if you are 65 or older, you can increase deductions by ‘lumping’ your medical expenses and incurring additional medical expenses in 2016. This might mean buying eyeglasses or contact lenses, prescriptions you know you will need, or elective items like dentistry. Note that you can pay with a credit card, and the treatment must have at least started.
The deduction for state income taxes is anticipated to disappear. This means that 2016 may be the last year in which you can deduct your state income taxes. If you typically owe state taxes, paying an estimate before year-end would give you a deduction that you might not otherwise be able to use. If you overpay, you will have to pay tax on the refund in 2017. Be careful if you are subject to Alternative Minimum Tax (line 45 on the 1040). If you are subject to AMT, paying extra on state taxes doesn’t help.
Real estate taxes are deductible. Many homeowners receive a winter tax bill that is due sometime in 2017. Given that the deduction for real estate taxes may forever disappear, ‘lumping’ your property taxes can be very helpful. Be careful if you are subject to Alternative Minimum Tax (line 45 on the 1040). If you are subject to AMT, paying extra on property taxes doesn’t help.
These are taxes based on the value of your property, like car license fees based on a car’s value. Since the deduction for taxes may disappear, pay these now if you can. Be careful if you are subject to Alternative Minimum Tax (line 45 on the 1040). If you are subject to AMT, paying extra on personal property taxes doesn’t help.
Charitable contributions are deductible in 2016 and will likely still be deductible, subject to new limitations. However, you may be in a lower bracket in 2017, so the deduction may save more now. You can also donate to a Donor Advised Fund (DAF), which lets you make a contribution now and indicate the charities later. Line 16 is for cash or check contributions.
Noncash contributions can be things like personal property (like clothes or books or whatever) and appreciated property (like stocks or mutual funds). Both make sense, and giving appreciated property can cut income taxes and avoid the capital gain tax on the appreciated property. Given the standard deduction may be going up and the tax brackets may be going down, a 2016 charitable contribution can provide a larger benefit today than next year.
These may be eliminated. You can deduct casualty or theft losses if the amount of the losses, net of insurance proceeds, exceed 10% of Adjusted Gross Income.
This is part of a cadre of miscellaneous itemized deductions. Line 21 is for employee business expenses like union dues and job education. Public safety officers like police and fire may have special deductions. Miscellaneous itemized deductions are subject to a floor of 2% of Adjusted Gross Income.
Tax preparation fees are deductible if they, plus other miscellaneous itemized deductions, exceed 2% of Adjusted Gross Income. This may be eliminated.
This line, which may be eliminated, would include investment fees and expenses, safe deposit box, and certain legal and accountings fees relating to production of income (like tax planning).
This line, which may be eliminated, includes gambling losses to the extent of gambling income, and certain kinds of casualty and theft losses on business property.
This is the limitation on itemized deductions. Itemized deductions are reduced if your Adjusted Gross Income is over a certain amount. For 2017 the limitation is proposed to be $100,000 for single and $200,000 for married, a lower threshold than for 2016.