Posted on 12/24/2017 4:21:04 AM PST by SkyPilot
The people who collect taxes in New York are acting fast to help taxpayers try to get ahead of a pitfall for homeowners in the new federal tax overhaul.
The tax bill, which passed earlier this week, is confusing. Here's what we know:
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.
At the same time, it doubles the standard deduction to $12,000 for a single taxpayer and $24,000 for a family.
That means more people will no longer itemize their taxes.
But there is one strategy homeowners who itemize now can use to beat the bill.
If your county allows payment of 2018 property taxes at the end of 2017, you can pay now and take the deduction on your federal income taxes in the spring, according to many news sources.
Some tax collectors and other government officials are going out of their way over short-staffed holidays to make this happen.
But the news has also set off a storm of skeptics who wonder if the IRS will really allow it.
The bill passed earlier this week in Washington prohibited the deduction of prepaid state and local income taxes. But Congress was silent on the prepayment of property taxes, said Stephen Acquario, executive director of the New York State Association of Counties.
"Ultimately, it will be up to the IRS to determine if the prepayment of 2018 property taxes are deductible for the 2017 tax year," he said.
Many taxpayers have been prepaying county property taxes and taking the early federal deduction for years. One town tax collector said she keeps a list of people who prepay and gets the bills to them ASAP.
(Excerpt) Read more at syracuse.com ...
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?
Taxes are taxes.
“””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.
Isn’t this a excellent reason to protest tax rates in these states? Because there has been no limit on these deductions, folks in these states don’t mind paying those taxes to the state. Maybe it’s time they start caring how much they are being taxed.
Maybe it’s time they start caring how much they are being taxed.
—
that would be novel ...
Irs already ruled Rev. Rul. 71-190, 1971-1 ..only a good faith estimate of 2017 tax is deductible in 2017.
Thanks!
No taxes are not paid until your escrow agent pays the tax. Call them right away to have them pay January tax early, unless you are subject to alternative minimum tax.
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.
For my old clients whose itemized deductions were close in amount to the standard deduction, I advised them to do this to maximize the deductions.
IRS has no choice but to allow it. Individual taxpayers income and deductions are based on the cash basis, i.e. when you get paid, and when you pay your taxes.
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.
I read somewhere that the extra deduction for Seniors and the blind of $1300 was preserved. If that’s true, for a single senior (my category), I think it means I get to deduct $13,000. Because I’m upper poor, the remaining taxable income will fall into the 10% category. For me, it’s a slight advantage. What’s good for the economy is that these slight boosts for a great part are spent in the local economy.
They just raised my house payment, beginning Jan 1, for more in the escrow. I refinanced to lower my payment and taxes and insurance went up last year. My house worth went up also. Irma came through here and I have a new roof.. insurance raises payments with one claim?
There are two different issues. In CT we can pay our 2017 tax in 2 installments. One is due in July, the other is due in January. I have sent letter to all my clients to consider paying January installment on December. I have not recommended they pay next year’s tax for 2018 in December because that would not be deductible this year.
Also for income tax, I have recommended that they pay January installment in December and consider doubling it because a 25 percentage extra is probably reasonable
Escrow cash belongs to you and is not considered paid to your local government until they pay it.
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.
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