Yes, Virginia ... Oregon..., there is a Santa Claus.... Tax Law Change…..

Dec 22, 2017 | By: Michael Blanchard

Letter from a friend:

Hey Mike: I saw on Facebook that the new tax law will hurt all Oregonians because we can’t get credit for the state taxes that we pay next year. My friends are all cashing in their Bitcoin to pay Oregon tax ahead for 10 years because it’s the smart thing to do. My Papa says, "If you see it on the JGC blog, it's so." Please tell me the truth, should I sell my collectors edition “The Last Jedi” popcorn tin and remit the proceeds to the State of Oregon by New Years’ Eve?”

(Name withheld due to privacy concerns)

(Name withheld due to privacy concerns), your little friends are wrong. They think because something has been “shared” and “liked” by someone that made a funny comment on an adorable cat video 3 years ago, it must hold the wisdom of the ancients.  They do not believe unless it is “trending now”. In this great universe of ours, tax law is to be applied on an individual basis, taking into account unique facts and circumstances.  

Yes, there is a new tax law. It has been signed by the president and carries with it many new unread sections and limitations and rates and definitions phase-outs and rates and limitations and repeals and of course, many intended and unintended consequences. Alas! how dreary would be the world if there were no tax law changes! It would be as dreary as if there were no (Name withheld due to privacy concerns).

But, should one pay a monumental amount of tax to Oregon by December 31, 2017, to gain some advantage over the mean ogres that assess federal income taxes? Why, did you ever see fairies dancing on the lawn? Of course not, but that's no proof that they do not pay their taxes on a cash basis, just like you. Should you somehow deliver 10 times $10,000 to the great hall of Revenue right down on Center Street, and they issue an officially stamped receipt (in duplicate for delivery to your tax advisor), you likely will have not achieved any great accomplishment.

Why not?

Congress has specifically limited the deduction for state income taxes paid in 2017 to ONLY those taxes you owe for 2017. Even if that wasn’t the case, refunds of state income tax that are deducted become income in the next year when calculated and refunded in the next year. Finally, “Alternative Minimum Tax” exists to discourage such behavior. Thus, we would urge you and your friends to pay in what you expect to owe for 2017, but not a significant amount more.

For most of our clients, sending in their 2017 estimated tax by Dec 31 will be a smart move. However, trying to go above and beyond will not help. In some cases, making charitable contributions that you would otherwise make next year would also be a good move. For many, the “standard” deduction will increase substantially in 2018 and there will be benefit to the 2017 deduction.

If you have been blessed with a good year and your income is higher than it was in 2016, please contact us to see if you should increase your estimated tax payment to Oregon. Because, in all this world, there is nothing else real and abiding as personalized tax advice.

Give Johnson Glaze a call today if you need help or have questions regarding year end tax payments. 503-390-7880