State and Local Taxes, Property Tax Under Republican Tax Plans: Questions

[Trudie]

This is a thorough summary of what's being proposed:
https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968

It says that both proposals plan to keep the deduction for property taxes, but ditch the deduction for state and local taxes.

Here's my question:
Will property taxes and state/local taxes be part of a combined limit?  Or, will they continue to be separate deductions as they are now on the Schedule A?

If they're combined in 2018, this would cause me to prepay some of my property taxes in 2017 to maximize my benefits.  If not, I'll load up the prepayments in 2017.

As an aside -- found it notable that one of the plans wants to eliminate the deduction for interest on HELOCs.

We're getting screwed anyway, between the elimination of personal exemptions and the loss of SALT we're going to have an additional 10K in taxable income next year.

[ManyMountains]

Thanks for sharing that link. It was the best summary I've seen of the two tax plans.

[Trudie]

I have a tax planning spreadsheet I use and plugged the numbers under both the Senate and House proposed plans for next year.  Here's what I found:

(1) Even if we aggressively stacked deductions in 2018 we'd still only end up within a few hundred bucks of the standard deduction.  I played around with it and the reality is that when the state and local tax deduction goes away it's hard to replace it.
(2) Given #1, we will be taking the standard deduction in 2018.  It's not worth it to us to manipulate our cash flow like that for so little gain.
(3) Given #2, I will be pre-paying some property taxes and charitable contributions in late 2017.  I will use the extra space below the 15% bracket created by these stacked deductions to harvest capital gains, then immediately re-invest to re-set our cost basis on some unqualified investments.  Rationale:  They do us more good this year.
(4) Assuming the same income and taking the higher standard deduct of 24K in 2018 and following the other plan rules we save a couple of hundred bucks a year on taxes. 
(5) I am sitting on my plan until about December 20, but will plan to implement it unless the tax plan implodes.
(6) I'm still hoping this tax plan implodes.

[bacchi]

^^^^ Good summary. We're waiting a few weeks, too. Vanguard's distributions don't come out until Friday anyway.

[josh4trunks]

I am also waiting for this thing to pan out, or not. I started planning with the assumption the Senate bill would pass and came up with some conclusions for my situation.

Background
My wife and I gross about $200K, but defer $61K due to 457b/401k/403b and my pension.
California state tax on that is about 6K+
We give around 20K/yr to our church/charities
Our mortgage interest + property tax is about 10K/yr

Conclusions

• The standard deduction increases significantly, and we can no longer itemize state income tax. So, we no longer cross the itemizing thershold before including time-able payments (2nd property tax payment, charitable donations).
• I pre-paid my property tax bill for April 2018, and will pay ahead all my charitable contributions for 2018 on a 0APR credit card. I can then itemize these in 2017 and will take the standard deduction in 2018.
• My plan moving forward is to stack my charitable donations, and future property tax bill to claim itemized deductions every other year. I will probably give normally in 2019, then before the end of 2019 setup a Donor Advised Fund (DAF). Hopefully I will have cash (or even better appreciated assets) saved up, and give to my DAF. Then use that to give from in future year(s).
• If I feel inclined to give to some cause in 2018, I'll ask if it's possible to pledge to give January 2019.

This see-saw technique helps if you...

• Don't cross the itemizing threshold by mortgage interest/1st payment property tax.
• Would cross the itemizing threshold when adding 2nd property tax payment + 2 years of charitable contributions

People were already using this technique with the current tax scheme, but the proposed changes would change who can take advantage of it.

[fuzzy math]

It really irks me that this could all get passed so late in 2017 that I cannot move $$ around fast enough to compensate, given that it's effective in 2018.