With the Republican-led U.S. tax overhaul slated to successfully pass through the U.S. Congress by this week, taxpayers and accountants are working overtime to optimize the impact of the revised U.S. tax code on their tax profile.
With the Republican tax overhaul slated to sharply slash deductions allowable on federal tax bills, accountants and financial advisers are working overtime to file U.S. taxpayers returns before before January 1.
The U.S Congress is expected to push through the new Republican-led tax legislation this week which caps the amount, individuals, local and state individuals can deduct from their federal tax bills at $10,000.
The average American, who itemized his or her tax bill in 2015, claimed more than $27,000 in deductions.
Although taxpayers have until January 15 to pay the final installment of their 2017 dues, as per Tom Holly from PriceWaterhouseCooper, an accounting firm, clients are eager to settle their dues sooner.
“It’s going to be a very busy holiday season for advisers,” said Holly, head of PwC’s wealth and asset management division.
Similarly, as per Lisa Featherngill, managing director of wealth planning at Wells Fargo’s Abbot Downing, she will have to skip a family trip to Valero Alamo Bowl football game in Texas on December 28 for work.
Interestingly, according to Featherngill, wealthy clients and their accountants are trying to figure out whether it makes sense to estimate and pay the rest of their 2017 itemized taxes by December 2017 or pay it as a lump-sum.
Furthermore, high bracket tax owners, especially those who income is above $100,000, may end up paying the alternative minimum tax, which limits the deductions a person can take against his or her federal income tax.
“People really have to run the numbers because … if they are subject to alternative minimum tax, some of those taxes wouldn’t be deductible anyway,” said Featherngill.
Once the Republican-led tax overhaul bill is passed, it would mark the biggest U.S. tax rewrite since 1986.
It would see corporate income tax slashed to 21% from 35% and offer a mixed bag for individuals, including middle-class workers, by roughly doubling a standard deduction that does not require itemization, but eliminating or scaling back other popular itemized deductions and exemptions.