Many homeowners are rushing to pre-pay their 2018 property taxes. Many accountants are calling their clients urging them to do so.
There is a lot of confusion on this issue.
For one, the law specifically states you cannot pre-pay state and local taxes. Many news outlets are reporting that the law also prohibits the pre-paying of property taxes as well, but other news outlets disagree.
The IRS may not allow the deduction of the pre-payment anyway, even if you paid the entire 2018 tax bill in full in December of 2017. You also may only be allowed to deduct the last quarter (Feb-Apr) in some states if they figure their taxes that way.
States like NY, CA, NJ, and MA are sending conflicting and confusing directives.
http://www.nj.com/politics/index.ssf/2017/12/sweeney_state_should_help_nj_residents_prepay_2018.html
The state Division of Local Government Services should tell municipalities how to quickly issue those bills so residents can pay them by Dec. 31 and claim the deduction on their 2017 federal income taxes, Senate President Stephen Sweeney said Saturday in a news release.
Here’s the short form: You can’t pre-pay your 2018 state income or property taxes. But you can pay the last installments of your 2017 taxes — which are not due until next year — before 2018. If you itemize, doing so could save you big money on your federal tax bill this year.
Every time he stepped away from his desk last week, the supervisor of the Town of Greenburgh returned to a voice mail message from a resident wanting to know if it was possible to prepay at least a portion of the 2018 property tax bill in the waning days of 2017.
“I’m getting swamped with many, many calls, usually one an hour, from people who want to prepay their taxes,” said the supervisor, Paul J. Feiner, who manages the Westchester County town of 92,000 people about 25 miles north of Midtown Manhattan. “Practically all the officials in Westchester are being swamped with calls.”
Bottom line: even if you do pre-pay a portion or all of your 2018 property taxes, all it will take is an IRS statement saying they will not accept the pre-payment for deduction purposes to nullify your efforts.
Tax info ping regarding pre-payment of property taxes for 2018.
This is an ignorant question: Taxes paid via an escrow account, deductable?
“””At the same time, it doubles the standard deduction to $12,000 for a single taxpayer and $24,000 for a family”””
There are lots of lazy journalists.
The Standard Deduction was not doubled. No, the Personnel Exemption was removed as a separate item and included with the Standard Deduction.
For many families the Personnel Exemption was $8,300 and the Standard Deduction was $13,000 for a total of $21,300.
Many families will get an 11% increase in their Standard Deduction in the new tax law.
Irs already ruled Rev. Rul. 71-190, 1971-1 ..only a good faith estimate of 2017 tax is deductible in 2017.
Bottom line: no definitive answer.
However, why not just go ahead and pay the bill, if the municipality accepts the payment? The IRS is never going to check into all payments to determine if they were paid as due, or before they were due.
For tax year 2018, pay the piper the full amount. Those in exorbitant tax states will have to pay a little more. Boo hoo.
The bottom line is that there’s no harm in paying those taxes before the end of the year. It’ll be one less bill to worry about next year and it might be deductible.
If you wanted to be very aggressive, pay the 2018 tax and deduct as a charitable deduction.
Other tips for those who will not be itemizing next year because standard deduction is double. Pay January mortgage payment so that it is received by bank in December. Pay January contribution in December.
I’m looking forward to seeing how this will work out. We always itemize, but if the standard deduction goes up, we may no longer need to itemize.
I don’t think our property tax on both of our houses combined is going to be more than the deduction.
This tax bill has the potential to really simplify our tax filing.
““I’m getting swamped with many, many calls, usually one an hour,..”
Wow! One call a hour./sarc
“The bill will no longer allow taxpayers to deduct more than $10,000 in state and local income and property taxes from their federal income taxes.”
That may be the best portion of the Trump Tax Cut but that number should have been reduced to $5,000 or even $1,000.
For every hundred dollars in taxes you deduct, how much does that reduce your taxes?
Since this new law isn’t in force until Jan 1, 2018, anything you prepay in 2017 should not be a problem. I don’t see how the new law can control what you do in 2017.
I used to pay all my own property taxes & I paid the property taxes on the house my Dad lived in. He was earning $250 a month from Soc Sec, and his annual taxes on a small house in Wisconsin were around $2000 a year. Obviously, he could not afford to pay those taxes himself.
I used to pay ALL MY property taxes AND his property taxes doing 1 1/2 years in one year—prepaying just as they are discussing here. I would have to pay 1/2 year in one year, but with payments due in time frames such as August & January or December & April, Sometimes I could afford to pay all of the 2 bills all in one year. Or I could pay a much larger portion in one year & get a real nice refund. It worked out mathematically, since I was single & didn’t get many other tax breaks. YOU would have to make sure that your payment was received & acknowledged in 2017. You cannot just write a check dated 2017 that they do not receive until 2018, IMO.
Dad wasn’t worried about his ability to pay the taxes & he could relax over the issue. I just had to ask the town clerk/treasurer to send me a copy of his tax bill so I could may it for him. She complied without a hitch.
It all would depend on when you get the bills & how the payments are structured. I currently live where they ask for 4 payments—August-Oct-Jan-April. I paid all of the bill in August & there were no problems. Jest a cheery person t the county treasurer’s office.
Too many confusing tax stories my head spins every time I read a new tax article, especially being in a high-tax state, NJ. I’m just going to see what’s what when I file, which leads me to this one question: is this effective this filing, by THIS April 15 or for next filing?
Paying now will give these taxpayers a really focused, intense view of how high their taxes actuallt are.
Some county jurisdictions allow prepayment of property taxes for a discount, up to five years. I’ve suggested doing that in the past as a way to lock in the rate for that period of time to stave off predatory taxation in the event of some societal disruption or economic collapse. I’m sure the taxing authority loves mo’ money even if it does cannibalize future receipts, though.
So even if my property taxes are paid by impound account, I can go ahead and pay the remaining 2017 property taxes (which aren’t due until April 2018) by Dec 31?