We’re getting quite a few calls and inquiries into our office from anxious San Franciscans about the new tax legislation passed by Congress and signed by President Trump. It’s no secret that San Francisco isn’t generally a “pro-Trump” town, but the politics of this, aside, it will become the law of the land. Given San Francisco’s and California’s high tax rate, one cause for special anxiety is the high state and local taxes and the cap on deductibility. We won’t go into the detail of the law as there are many easy-to-find articles on the Internet; just Google ‘Trump Tax Plan Provisions’ to find in-depth articles.
The differences that are causing anxiety for many California tax payers can be summed up as the following two big issues:
- State and Local Taxes. State and local tax deductibility is capped under the law, and for those with high incomes in high tax states, this can have an impact. Many San Franciscans are not only high income earners but also pay some of the highest property taxes in the nation.
- Changes to Corporate Income Tax. The law reduces corporate income taxes and has some interesting provisions in how “pass thru” entities are taxed. If you own a business in San Francisco (or if you could potentially incorporate yourself), there may be some tax advantages.
Other provisions of the law such as changes in the standard deduction vs. itemization also may have an impact. The thing with any complicated piece of legislation and with personal income taxes as well as taxes on businesses is, “it depends.”
A Personalized Approach: You and the New Tax Law
Like every other CPA firm and accounting practice in San Francisco, we’re digesting the law ourselves and beginning to look out for our clients vis-a-vis this new tax situation. Remember, however, that the law doesn’t change your 2017 tax situation, as it doesn’t go into effect for the 2017 tax year, but rather for the 2018 tax year. So we all have some time to take a collective breath, and analyze the law and compare the provisions of the law to your personal income and property (including that of any businesses you may own), and then optimize your behavior to minimize your taxes. As they say, “the more things change, the more they stay the same.” The tax laws are complicated and you need a good CPA to optimize your income or behavior against this complexity. The furniture may be rearranged with this new tax law, and we just have to figure that out – together.
A Personalized Consultation
OK, now that you’ve realized that the tax laws are changing and that the complexity of tax laws isn’t something new, you may realize that your next best step is to reach out to a San Francisco tax professional for help. At a conceptual level, we will then evaluate your income and property against the new tax structures, with an eye to advising you on what modifications can be made to minimize taxes. To use just one example, many professionals may benefit from incorporating because the new tax laws are more favorable to corporations, including pass thru entities. Our job is to evaluate your income and property and give you recommendations. What’s the best first step? To reach out for a free consultation with our office on your tax needs. Just contact our office. Even better, let us evaluation your tax returns from previous years and create a long term strategic plan to minimize your taxes.