Posted on 12/28/2017 4:42:11 AM PST by SkyPilot
Sean Zielenbach writes a check to prepay his property taxes Wednesday at Alexandria City Hall. People across the United States rushed this week to pay their 2018 property taxes early, hoping to take advantage one last time of a federal deduction that will be scaled back under the tax-code overhaul signed by President Trump.
On Wednesday, however, the Internal Revenue Service announced that those prepayments could be deducted only in limited circumstances, a decision that appeared to invalidate many taxpayers’ efforts and raised the prospect that local governments could come under pressure to refund millions of dollars.
The announcement stoked confusion surrounding one of the most controversial elements of the tax law — a $10,000 cap on deductions for state and local taxes that will disproportionately affect higher-tax, Democratic-leaning states. It also offered a glimpse of the kind of hiccups that could arise in coming weeks as the IRS releases guidance on other facets of the bill, the largest overhaul of federal tax law in three decades.
In affluent states with high taxes and property values, local officials have been besieged in recent days by people trying to pay their 2018 property taxes early so they can deduct those payments before the cap takes effect.
However, the IRS said Wednesday that filers could only avoid the cap by paying property taxes that have been assessed in 2017. Many local governments, including most Washington-area jurisdictions, have not completed assessments for upcoming years.
(Excerpt) Read more at washingtonpost.com ...
For those who do pre-pay all or a portion of the 2018 bill by Dec 31st 2017, you can then claim that deduction on this year's taxes. Next year, your property taxes, state, and local combined deduction is capped at $10,000.
You may not have enough deductions to itemize in 2018, especially if you pre-pay some of that property tax bill for 2018 this year, but you will save money by this April 15th for deducting those. Next year you may have to take the standard deduction.
Accountants and CPAs all over the country are advising their clients to pre-pay as much of their 2018 property taxes by Dec 31st as they can.
If you write a check to your local tax office, contact your mortgage company and fax them a copy of your reciept for payment. They will then withhold payment for the quarters in 2018 you already paid, and will sort out your escrow later.
Tax Law info ping.
Still worth a shot. If the deduction isn’t there for the payment made this year, they’ve lost nothing (other than a few months of potential investment returns). If it is, then they’ve saved a pile.
People across the United States rushed this week to pay their 2018 property taxes early, hoping to take advantage one last time of a federal deduction that will be scaled back under the tax-code overhaul signed by President Trump. On Wednesday, however, the Internal Revenue Service......
Exactly correct.
I know that NY issued a directive to all tax offices throughout the state to issue the full 2018 property tax bill to residents last week. Yesterday, Gov Christie did the same for NJ.
However, the tax assessors offices are scrambling to comply. But - they probably already have the first 2 quarters assessed and billed - and CPAs and Tax Attorneys are telling their clients to pre-pay those property taxes for 2018 by Dec 31st!
You will save big time instead of giving your money to the IRS.
So in other words if you write a check to your property tax collector on 12/31/2017 for what you think or estimate your 2018 tax liability will be, you are SOL on taking that 2017 tax deduction absent having been actually billed for the 2018 tax assessment in 2017.
IRS hasn’t changed anything. this is the rule that has been in effect for years.
http://freerepublic.com/focus/f-news/3616509/posts
Additional news threads on this:
http://fortune.com/2017/12/27/irs-conditions-2018-property-taxes/
https://www.nbcnews.com/business/taxes/irs-cautions-taxpayers-prepaying-property-taxes-n833036
Absent the tax bill, there are no 2018 taxes. That which doesn’t exist is not deductible.
H&R Blocks Tax Institute says otherwise. IMHO the tax court will side with the tax payer. Cash basis is cash basis.
As I posted, NY and NJ issued executive orders to their tax offices to allow the full 2018 pre-payments. It was unknown if the IRS would allow this. Now we know they will only allow it if those bills were issued under certain circumstances.
Here is that link:
Here is the notice:
_______________________________________________________________________
IR-2017-210, Dec. 27, 2017
WASHINGTON - The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.
The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.
The following examples illustrate these points.
Example 1: Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018. On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018. Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.
Example 2: County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018. County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019. However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year. Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.
The IRS reminds taxpayers that a number of provisions remain available this week that could affect 2017 tax bills. Time remains to make charitable donations. See IR-17-191 for more information. The deadline to make contributions for individual retirement accounts - which can be used by some taxpayers on 2017 tax returns - is the April 2018 tax deadline.
IRS.gov has more information on these and other provisions to help taxpayers prepare for the upcoming filing season.
Property tax bill were already sent out in some states for at least the first 2 quarters for 2018. Those taxes exist and can be pre-paid.
Sounds like those of us who haven’t received a bill, but the county says (verbally) that we can pay any amount we want are likely @#$%!
Why limit the deduction to 2018? Why not prepay and deduct taxes for 2019,2020,2021 and 2022 as well
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The first sentence of the article was inadvertently left off. Here it is:
People across the United States rushed this week to pay their 2018 property taxes early, hoping to take advantage one last time of a federal deduction that will be scaled back under the tax-code overhaul signed by President Trump. On Wednesday, however, the Internal Revenue Service......
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But, but...(D)s say people don’t alter their behavior based upon tax changes!?
Not that the (R)NC is bright enough to hammer the ‘opposition’ w/ this tidbit...
Here in Connecticut, the fiscal year is July-June. The mill rate is set in May, and the bills are mailed out in June, with one payment due on July 1, and the second payment due on January 1. Naturally, with the 30-day grace period, most people pay sometime in July and January.
But it seems that, under these guidelines, it should be OK to pay the second payment in December, since the taxes have been set and billed. That is what I have done, so I have made 3 property tax payments in 2017.
Because you can’t take a deduction for a liability that has yet to occur or has yet to have been billed.
You cannot deduct an expense you don’t owe. Simple basic tax law. Paying something you don’t owe us a gift.
Only gifts made to certain charities are deductible as a charitable deduction. Government is a deductible charity. However, giving with an expectation of receiving something of value in return is not a deduction.
I figure that I'll save almost $700 just by paying one month/six months early.
I agree and have advised my CT clients accordingly.
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