Tax Bill-Individual Rates and Planning

The current seven individual tax rate brackets are modified under the new Tax Bill to be 10%, 12%, 22%, 24%, 32%, 35%, and 37% effective January 1, 2018. This provision is set to “sunset” after 2025.

The top 37% rate applies to single filers with over $500,000 of taxable income and married joint filers with over $600,000 of taxable income. What should you do now?

What You Should Do Now

You should review what marginal tax bracket you think you will fall into for 2017 compared to the new 2018 tax rates. This may impact your decision of whether to defer income or accelerate deductions, depending on which year will provide the most tax savings.

If you are planning to sell a small business or other appreciated assets and are looking to defer income into 2018 and beyond, you should consider reporting the sale using the installment method.

Like-kind tax deferred exchanges can also help you defer the recognition of income to future lower tax rate years.  But be careful: the tax bill limits 1031 like-kind exchanges to real property starting in 2018.

If you are considering loss harvesting to deduct capital losses in 2017, beware of the wash sale rules that generally provide that losses are not deductible if you repurchase a “substantially similar” security within 30 days of the sale.