Taxpayers calling county treasurer’s office to pay early, avoid new rules
The telephones have been busy the past few days at the Allegheny County treasurer’s office. Before the end of the year, many taxpayers want to take advantage of the old rules related to deducting their state and local taxes when filling out their federal forms.
“We’ve had an influx of calls from people wanting to pay their 2018 taxes early,” said one person who works in the office. “They are calling to find out how to go about paying taxes in advance and we are providing them with the information.”
New rules that will go into effect next year will do away with several breaks that have in past years helped reduce many taxpayers’ bills. Just how big an impact those changes have will
depend on the household.
The Republican tax overhaul known as the “Tax Cuts and Jobs Act,” nearly doubles the standard deduction. Last year, singles could claim $6,350, while the new rules bump that up to $12,200. For married couples, the standard deduction goes from $12,700 to $24,000.
By raising the standard deduction — which reduces the amount of income on which you are taxed — federal lawmakers have made it less necessary for many people to track down every receipt for things like donations and certain professional expenses.
“The doubling of the standard deduction will definitely mean a lot more people will not need to itemize deductions,” said Howard Davis, president of the Davis, Davis & Associates accounting firm in the Strip District.
Among other things, the new tax law limits interest on mortgage debt to the first $750,000 of debt instead of the current limit of $1 million. The itemized deduction for state and local taxes — including real estate taxes — will be capped at a total of $10,000.
Other itemized deductions will be history. That includes moving expenses, tax preparation fees, investment-related fees, safe deposit box rental and union dues.
After this year, personal casualty losses will no longer be deductible, other than those attributed to a disaster as declared by the president.
The deduction for alimony paid to an ex-spouse also would be disallowed, and the income would be taxable to the recipient. This would only apply to divorces entered into after 2018.
“The main things clients seem to be concerned about are property taxes, and state and local income taxes,” said Alex Kindler, a partner at H2R CPA in Green Tree. “If you itemized, you could have deducted those in the past. If you never itemized before, you don’t care.”
Under the old tax law, losses from gambling can only be deducted to the extent of gambling winnings, while other expenses connected to gambling — food and lodging — can be deducted in excess of winnings.
The new tax law would cap the deduction for both losses and other expenses to the amount of gambling winnings.
Currently, about 49 million taxpayers, or 28 percent of filers, itemize on their taxes, according to the Urban-Brookings Tax Policy Center.
The Internal Revenue Service reports about 600,000 Americans claimed an alimony deduction on their 2015 tax returns, the most recent year for which data is available.
Unless otherwise stated, all of the changes in the new tax law for individual taxpayers would expire after 2025, after which the treatment of these expenses would be reinstated to their 2017 status.
The bill just passed both U.S. houses this week but some accountants are already pushing for action in response.
James Lange, a Squirrel Hill-based tax accountant, attorney and author, said he is advising clients to pay expenses — such as state and local income taxes — before the end of the year so they won’t lose the deductions.
“Since most of us will be in a lower tax bracket, even if the deductions will be useful in 2018, they will be at a lower rate so it is better to take them in 2017,” Mr. Lange said.