PSA: consider pre-paying your property taxes and January mortgage payment

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whodidntante
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PSA: consider pre-paying your property taxes and January mortgage payment

Post by whodidntante » Fri Dec 01, 2017 6:24 pm

It is often advantageous to group two years of property taxes into the current year. Also, some lenders will allow you to pay your January mortgage payment in December and reflect the interest in the current year. These moves may allow you to shield more income from tax. As we are now in December, It is wise to see if this fits your personal situation and to act on it before the opportunity slips by.
Last edited by whodidntante on Sat Dec 02, 2017 3:08 pm, edited 1 time in total.

Jack FFR1846
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by Jack FFR1846 » Fri Dec 01, 2017 6:27 pm

Ask before you do, though. I attempted to squeeze the upcoming January property tax payment in before the end of December some years ago. They sent back the check saying that they don't have the official tax rate and payment approved by the state so a bill wasn't sent so they won't accept payment.
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ccieemeritus
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by ccieemeritus » Sat Dec 02, 2017 12:38 am

In my locality the property tax bill for Feb 2018 is already in hand and payable.

While discussions of proposed legislation are OT, this year may be a good year to be ready to prepay on short notice.

daveydoo
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by daveydoo » Sat Dec 02, 2017 3:16 am

ccieemeritus wrote:
Sat Dec 02, 2017 12:38 am

While discussions of proposed legislation are OT, this year may be a good year to be ready to prepay on short notice.
I think it's fair game now.
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jebmke
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by jebmke » Sat Dec 02, 2017 8:25 am

daveydoo wrote:
Sat Dec 02, 2017 3:16 am
ccieemeritus wrote:
Sat Dec 02, 2017 12:38 am

While discussions of proposed legislation are OT, this year may be a good year to be ready to prepay on short notice.
I think it's fair game now.
Nope; nothing has been passed by both House and Senate and signed.
When you discover that you are riding a dead horse, the best strategy is to dismount.

NorCalDad
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by NorCalDad » Sat Dec 02, 2017 8:44 am

daveydoo wrote:
Sat Dec 02, 2017 3:16 am
ccieemeritus wrote:
Sat Dec 02, 2017 12:38 am

While discussions of proposed legislation are OT, this year may be a good year to be ready to prepay on short notice.
I think it's fair game now.
Other references have already been shut down. I get it. While this may be a rare instance in which pending legislation is actionable only for a short window, one strength of this forum is that it avoids going down the political rabbit hole.

That said, yes, we should all think about prudent tax planning this month.

my2swedes
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by my2swedes » Sat Dec 02, 2017 8:57 am

We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?

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jhfenton
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by jhfenton » Sat Dec 02, 2017 8:59 am

I'm thinking about bunching some charitable deductions into this year because it seems clear that we will not be able to itemize deductions in 2018.

Through payroll deduction at work, I always pledge and donate to United Way. I'm going to talk to HR about dropping the payroll deduction and just making a lump sum donation in December. (I just want to make sure I still get my bonus vacation day. :beer)

It wouldn't accomplish much, though, with our mortgage payment. Our mortgage payment is due on the 21st of each month, and the mortgage accrues interest daily. (It was a refinance, and they ended up treating it more like an installment loan, even though it's a conventional 15-year mortgage.) So if I make January's payment a few days after December's, only a few days interest will be charged to the payment, leaving nearly two months interest to be charged against the February payment.

I don't have any direct control over our property tax payments. I'll have to see if I can get the mortgage company's escrow department to make January's payment in December. I'm skeptical.

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Tamarind
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by Tamarind » Sat Dec 02, 2017 9:19 am

my2swedes wrote:
Sat Dec 02, 2017 8:57 am
We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?
I am also interested in this. My 2017 taxes were just paid from escrow and this is the last year I expect to be able to itemize (getting married and MFJ standard deduction is higher than anything I can itemize). Next year's bill should be the same, but won't be issued for months and isn't due until December 2018.

Who would I need to talk to in order to prepay?

NorCalDad
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by NorCalDad » Sat Dec 02, 2017 10:16 am

Tamarind wrote:
Sat Dec 02, 2017 9:19 am
my2swedes wrote:
Sat Dec 02, 2017 8:57 am
We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?
I am also interested in this. My 2017 taxes were just paid from escrow and this is the last year I expect to be able to itemize (getting married and MFJ standard deduction is higher than anything I can itemize). Next year's bill should be the same, but won't be issued for months and isn't due until December 2018.

Who would I need to talk to in order to prepay?
If I were in this situation, I would call my mortgage holder on Monday to explain that you will pay the assessor directly this month and that you want a refund of escrow tax funds by the end of the tax cycle. The escrow money is your money, and if you can show that your tax bill has already been paid, the mortgage holder should cut you a check in lieu of having to pay your next bill.

manita
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by manita » Sat Dec 02, 2017 11:01 am

Tamarind wrote:
Sat Dec 02, 2017 9:19 am
my2swedes wrote:
Sat Dec 02, 2017 8:57 am
We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?
I am also interested in this. My 2017 taxes were just paid from escrow and this is the last year I expect to be able to itemize (getting married and MFJ standard deduction is higher than anything I can itemize). Next year's bill should be the same, but won't be issued for months and isn't due until December 2018.

Who would I need to talk to in order to prepay?
Check out the other post on this topic "Maximizing 2017 Deduction, Re Property Tax", which hopefully can be merged with this thread. There's a post in there cautioning one to look at Publication 17 regarding the deductibility of taxes that have not been assessed.

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Tamarind
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by Tamarind » Sat Dec 02, 2017 2:29 pm

NorCalDad wrote:
Sat Dec 02, 2017 10:16 am
Tamarind wrote:
Sat Dec 02, 2017 9:19 am
my2swedes wrote:
Sat Dec 02, 2017 8:57 am
We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?
I am also interested in this. My 2017 taxes were just paid from escrow and this is the last year I expect to be able to itemize (getting married and MFJ standard deduction is higher than anything I can itemize). Next year's bill should be the same, but won't be issued for months and isn't due until December 2018.

Who would I need to talk to in order to prepay?
If I were in this situation, I would call my mortgage holder on Monday to explain that you will pay the assessor directly this month and that you want a refund of escrow tax funds by the end of the tax cycle. The escrow money is your money, and if you can show that your tax bill has already been paid, the mortgage holder should cut you a check in lieu of having to pay your next bill.
That's not quite what I'm after. I wanted the 2017 bill paid from escrow, but I'd like to prepay out of pocket the 2018 as well. Our taxes here are assessed in spring and due in fall. Maybe it won't be possible since the property tax for 2018 hasn't been assessed yet.

mega317
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by mega317 » Sat Dec 02, 2017 2:36 pm

Someone referenced in another thread that you might not be able to deduct if not yet assessed.

In my own case my spring taxes are already "due" although not delinquent until April. I called my lender who said if I prepay and notify them in writing, I will get a check.

SrGrumpy
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by SrGrumpy » Sat Dec 02, 2017 2:41 pm

Such prepayments are really only advantageous to middle- and high-income earners, right? For those in the 15% bracket, it's maybe not worth the effort? (Personally I'd rather hold on to my $2,200 tax payment to L.A. County until the April deadline)

Afty
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by Afty » Sat Dec 02, 2017 2:49 pm

This is also not advantageous for people paying AMT, right? Since property tax is not deductible under AMT.

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FIREchief
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by FIREchief » Sat Dec 02, 2017 3:01 pm

Afty wrote:
Sat Dec 02, 2017 2:49 pm
This is also not advantageous for people paying AMT, right? Since property tax is not deductible under AMT.
It might be, depending on the situation. Even though the AMT takes away the itemized deduction, the more you can lower your regular taxes due, the longer you can stay in the AMT. In some situations, the marginal rate in the AMT is 35% during the exemption phase out, but then drops to 28% until the regular taxes take over. If the regular rate is 35% or 39.6%, then extending the AMT can save money. It can get pretty complicated. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

jebmke
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by jebmke » Sat Dec 02, 2017 3:13 pm

SrGrumpy wrote:
Sat Dec 02, 2017 2:41 pm
Such prepayments are really only advantageous to middle- and high-income earners, right? For those in the 15% bracket, it's maybe not worth the effort? (Personally I'd rather hold on to my $2,200 tax payment to L.A. County until the April deadline)
They might be of value to someone who thought that next year might be a year they take the standard deduction.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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whodidntante
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by whodidntante » Sat Dec 02, 2017 3:15 pm

SrGrumpy wrote:
Sat Dec 02, 2017 2:41 pm
Such prepayments are really only advantageous to middle- and high-income earners, right? For those in the 15% bracket, it's maybe not worth the effort? (Personally I'd rather hold on to my $2,200 tax payment to L.A. County until the April deadline)
It depends.

If you're getting a deduction of $2,200 that you otherwise will not get to take, then I would say it is a great return on investment to pay now. It's something like buying a 3 month CD that is totally illiquid, with a 60% tax free APR.

NorCalDad
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by NorCalDad » Sun Dec 03, 2017 7:28 am

I just read about setting up a donor-advised fund and getting an immediate tax deduction. Thinking of going with Fidelity. We usually donate in small amounts to local charities, so I could see using this for at least the next few years. viewtopic.php?t=201611

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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by bengal22 » Sun Dec 03, 2017 7:46 am

One common strategy for taxes is to lump your expenses every other year. That way you itemize one year and the next you use the standard deduction. This year for me is an especially good time to do that. I had some high medical bills so I am pulling up charitable giving, buying glasses, and paying my property tax early. Next year my expenses should be lower and we will both get the 65 year deduction. Plus who knows, the standard deduction may even go up. But I'm doing it anyway. When I was working I always had enough to itemize so there was no need to do this.
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aristotelian
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by aristotelian » Sun Dec 03, 2017 7:48 am

NorCalDad wrote:
Sun Dec 03, 2017 7:28 am
I just read about setting up a donor-advised fund and getting an immediate tax deduction. Thinking of going with Fidelity. We usually donate in small amounts to local charities, so I could see using this for at least the next few years. viewtopic.php?t=201611
+1. If you usually give a certain charitable budget, better to stash a few years worth in your DAF this year since it may be a long time before you itemize if the bill that we are not allowed to talk about passes.

MikeG62
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by MikeG62 » Sun Dec 03, 2017 9:01 am

my2swedes wrote:
Sat Dec 02, 2017 8:57 am
We pay our annual real estate taxes into escrow. We have a payment due in June 2018 that i’d love to make before the end of 2017, and I’m certainly willing to write a check for the amount and send it in directly to the local treasurer.
But, does anyone know how that works with the escrow company....if I notify them that I personally made the June payment, can I stop them from making that payment? And then would I get a refund of that excess escrow deposit?
I do not think this strategy works if you are making the payment "into escrow" as I believe the payment must be made to the taxing authority.

This or course assumes the tax has been assessed and due. See also this thread here:

viewtopic.php?f=2&t=232163&p=3616356#p3616356
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flight
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by flight » Sat Dec 23, 2017 11:01 am

Regarding pre-paying the January 2018 mortgage payment, how do you ensure the additional interest paid will be reflected on the annual statement (Form 1098, I believe) used for tax purposes? Do you have to call them?

Said differently, how do you ensure the payment will be applied toward interest instead of making a payment on the principal balance.

thanks

mikep
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by mikep » Sat Dec 23, 2017 11:44 am

flight wrote:
Sat Dec 23, 2017 11:01 am
Regarding pre-paying the January 2018 mortgage payment, how do you ensure the additional interest paid will be reflected on the annual statement (Form 1098, I believe) used for tax purposes? Do you have to call them?

Said differently, how do you ensure the payment will be applied toward interest instead of making a payment on the principal balance.

thanks
I like to pay online, suggest you schedule it for Friday 12/29 or earlier and it will count on this years 1098 statement.

BW1985
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by BW1985 » Sat Dec 23, 2017 12:14 pm

flight wrote:
Sat Dec 23, 2017 11:01 am
Regarding pre-paying the January 2018 mortgage payment, how do you ensure the additional interest paid will be reflected on the annual statement (Form 1098, I believe) used for tax purposes? Do you have to call them?

Said differently, how do you ensure the payment will be applied toward interest instead of making a payment on the principal balance.

thanks
I was wondering the same thing. My interest is only $400/mo so it may not be worth the time spent dealing with it. I have my mortgage set up on auto payment so I don't know how that would even work.
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mega317
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Re: PSA: consider pre-paying your property taxes and January mortgage payment

Post by mega317 » Sat Dec 23, 2017 5:44 pm

BW1985 wrote:
Sat Dec 23, 2017 12:14 pm
My interest is only $400/mo so it may not be worth the time spent dealing with it. I have my mortgage set up on auto payment so I don't know how that would even work.
I just did this.
1. Cancel auto pay.
2. Make your Jan 1 payment today.
3. After the payment posts, resume autopay to start Feb 1.

It took me almost as long to type this post as it took to execute it. Surely you could save at least 100 bucks, right?

I've never done it before so I don't know how the 1098 will work. Can't you just amend if there is a mistake? Worst case, it won't work out and you lost a few days of interest on your money by paying a week early.

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