Americans are about to lose a tax deduction worth over $500 billion every year - here's what to do now before Trump's tax plan goes into effect

Thomson Reuters

• President Donald Trump's tax plan could go into effect as early as January 1, 2018, if Republicans manage to pass their final tax reform bill.
• Ahead of the looming changes, taxpayers can make end-of-year tax moves now, such as pre-paying their property taxes for next year.
• If your property tax bill is greater than $10,000, you'll be able to deduct more by paying next year's bill early.

It looks like the Republican tax plan might actually be passed before the end of the year.

For taxpayers who itemize their deductions, that could mean an increased tax bill in 2018. But there are some things you can do now to prepare for the looming changes, including maximizing your 2017 tax deductions while you still can.

Under current tax law, you can deduct taxes paid to state and local governments, including property, income, and sales tax. But both the House and Senate propose eliminating the deductions for state and local taxes (SALT), and capping the property tax deduction at $10,000.

Homeowners whose property tax bill is greater than $10,000 (and aren't subject to the alternative minimum tax) could save more money by paying next year's bill by December 31, 2017. That way, you can get the deduction for that payment when you file your 2017 taxes. This hack can be especially useful for homeowners in states with relatively high taxes, like New York, New Jersey, and California.

Deducting the full amount of your current property tax bill in 2017 might provide an even larger tax benefit if your tax rate goes down next year under the new plan, according to the experts at TaxAudit, an audit defense service.

For some, it might also be worth looking into whether it's possible to pay their SALT taxes before the end of the year.

Among those who itemize deductions, Americans claimed an average of $27,053 in 2015. The most common deduction was for taxes paid, which includes the SALT deduction and the property tax deduction. In total, Americans deducted $539.8 billion in taxes paid - nearly twice the amount deducted in mortgage interest, the next most common deduction.

What are property taxes?

Property taxes are just that: taxes you pay on your property.

There are two kinds of property taxes, depending on the property's mobility:

1. The real estate tax - for property that can't be moved, such as a house or land
2. The personal property tax - for property that can be moved, such as an RV or plane.

To get the property tax deduction, you have to itemize your deductions.

How do I pay property taxes?

Property taxes are administered on a local level, so to pay early you'll have to check with your county to see how to do so.

For example, if you live in New York City, the Department of Finance's page on property taxes explains how to pay electronically, by mail, or in person at any of its Business Centers. But keep in mind that if you own a home, your mortgage lender might pay your property taxes from an escrow account.

What is the SALT deduction?

The state and local tax deduction (SALT) also has two parts:

1. A deduction for property taxes
2. A deduction for either your state income taxes or the amount of state sales tax you paid.

Just like with the property tax deduction, many of those who benefit from this deduction live in states like New York, New Jersey, and California. The two largest beneficiaries are higher earners and states with a lot of high-income residents, according to the Tax Policy Center.

To get the property tax deduction, you have to itemize your deductions.

Andy Kiersz/Business Insider

How do I use the SALT deduction?

Similar to property taxes, SALT is administered on a local level. Taxpayers are able to deduct the amount of state and local income taxes for the year the taxes are paid - even if the taxes are technically earmarked for a different year.

For example, the tax deadline for estimated tax payments for the 4th quarter of 2017 is not until January 15, 2018. Freelancers and business owners who pay taxes quarterly could prepay their 4th quarter taxes before December 31 to be able to take full advantage of the tax deduction this year.

Pre-paying your state and local income taxes for next year may be possible, if you can get your state to credit payments made before the end of this year to your 2018 estimated taxes. That way, you can deduct the payment on your 2017 federal income taxes.

Taxpayers concerned about losing out on deductions should consult a tax adviser sooner rather than later, so as to maximize tax planning strategies available before the end of 2017 - and before tax reform goes into effect.