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may affect your timing
strategies and more
Income & Deductions
2
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he OBBBA makes permanent certain
TCJA changes to tax deductions and
the alternative minimum tax (AMT), as well
as making other changes to them. Some of
these OBBBA provisions will be beneficial
to many higher
others generally won’
your tax savings, familiarize yourself with
the OBBBA provisions that af
well as tried-and-true strategies for reducing
taxes, such as timing income, deductible
expenses and more to your tax advantage.
Timing income and expenses
Smart timing of income and expenses can
reduce your tax liability
can unnecessarily increase it. When you
don’
page 4) in the current year or the next year
deferring income to the next year and accel-
erating deductible expenses into the current
year may be a good idea. Why? Because it
will defer tax, which usually is beneficial.
But when you expect to be in a higher tax
bracket next year — or you believe tax
rates may rise — the opposite approach
may be beneficial: Accelerating income
will allow more income to be taxed at your
current year’
expenses will make the deductions more
valuable because deductions save more tax
when you’re subject to a higher tax rate.
Whatever the reason behind your desire to
time income and expenses, you may be able
to control the timing of these income items:
◗ Bonuses,
◗ Self-employment income,
◗
◗
extent they won’
withdrawal penalties and aren’
required. (See page 21.)
Some expenses with potentially controllable
timing are pr
deduction for SAL
interest expense (see Case Study 5 on
page 11), mortgage interest (see page 12)
and charitable contributions (see page 16).
The OBBBA impact
on timing strategies
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challenging under the TCJA because some
strategies that taxpayers used to implement
no longer made sense. The OBBBA makes
most of those changes permanent, but it
includes at least one change that might
make timing strategies more viable again
for certain taxpayers. Here’
significant changes that affect deductions:
Increased deduction for SAL Property
tax used to be a popular expense to time.
But with the TCJA’s $10,000 limit on the
state and local tax deduction, property tax
timing has provided little, if any
higher
might change for some taxpayers beginning
this year
If you reside in a state with no, or low
income tax, the SAL
relevant. But keep in mind that deducting
sales tax instead of income tax may be
beneficial, especially if you purchased a
major item, such as a luxury car or boat.
Elimination of most miscellaneous
itemized deductions. The OBBBA makes
permanent the TCJA’s suspension of miscel-
laneous itemized deductions that had been
subject to the 2% of adjusted gross income
(AGI) floor
professional fees, investment expenses and
unreimbursed employee business expenses.
Under the TCJA, your entire itemized deduction for
state and local taxes — including property tax and the
greater of income or sales tax — has been limited to
$10,000 ($5,000 for married couples filing separately).
Beginning in 2025, the OBBBA increases the SAL
deduction limit to $40,000 ($20,000 for separate filers).
However
exceeds $500,000 ($250,000 for separate filers), the cap
is reduced by 30% of the amount by which MAGI exceeds the threshold — but
not below $10,000 ($5,000 for separate filers).
This boosted SAL
taxpayers in high-tax states. For example, a single taxpayer with $40,000 in SAL
expenses who’
subject to the 30% reduction could save an additional $10,500 in taxes.
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reduction threshold might be able to further reduce their 2025 tax liability by
prepaying their 2026 property tax bill (if the tax has been assessed) in 2025.
Both the SAL
However
WHA
SAL
