Confusion about prepaying property taxes

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theta
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Re: Confusion about prepaying property taxes

Post by theta » Wed Dec 27, 2017 5:51 pm

First, I have to say I appreciate the IRS coming out with a ruling in a pretty timely manner. Second, I'm not so sure I would call this "hardline".

Here's the wording (from another thread):
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.

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Ice-9
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Re: Confusion about prepaying property taxes

Post by Ice-9 » Wed Dec 27, 2017 6:25 pm

Thanks for posting theta. Unfortunately, I am almost exactly in the situation of Example 2. Thank you for saving me from waiting 45 minutes in line to prepay for nothing!

Link if anyone wants to read it directly on the website: https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

jebmke
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Re: Confusion about prepaying property taxes

Post by jebmke » Wed Dec 27, 2017 6:43 pm

Ice-9 wrote:
Wed Dec 27, 2017 6:25 pm
Thanks for posting theta. Unfortunately, I am almost exactly in the situation of Example 2. Thank you for saving me from waiting 45 minutes in line to prepay for nothing!

Link if anyone wants to read it directly on the website: https://www.irs.gov/newsroom/irs-adviso ... id-in-2017
Same here. I'm already paid through June 2017. Even if my county accepted the payment for 2018 (July 2018-June 2019) it would not be deductible since I'm not on the hook for that tax. If I sold the house tomorrow I'd get money back for 2017 in the settlement.
When you discover that you are riding a dead horse, the best strategy is to dismount.

libralibra
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Re: Confusion about prepaying property taxes

Post by libralibra » Wed Dec 27, 2017 6:46 pm

This is exactly what even the experts on this forum were saying from the start - taxes have to be assessed to be deductible. It's surprising that the mayors and governors that declared emergency actions weren't better informed, or didn't wait for the IRS. They've essentially just swindled thousands of their residents into giving them 6-12 month free loans.

furwut
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Re: Confusion about prepaying property taxes

Post by furwut » Wed Dec 27, 2017 6:48 pm

I think the “hard line” comes from the feeling that in years past the IRS allowed, or at least didn’t challenge, people making an estimated payment.

Montgomery County in Maryland just told their residents to do exactly that.

The Wizard
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Re: Confusion about prepaying property taxes

Post by The Wizard » Wed Dec 27, 2017 7:55 pm

newkidontheblock wrote:
Tue Dec 26, 2017 8:10 am
We live in hennepin county in MN.
Last year we did itemize our deductions so we were about to deduct $37000 for state and local taxes.
I am not even sure we will itemize this year due to $10000 cap...
Are you sure you have your years straight?
Tell me which tax year the $10k SALT limitation starts...
Attempted new signature...

The Wizard
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Re: Confusion about prepaying property taxes

Post by The Wizard » Wed Dec 27, 2017 8:06 pm

Small Law Survivor wrote:
Wed Dec 27, 2017 3:00 pm
Just got back from the treasurer/assessor's office in my town, where it's the rare person that doesn't itemize.

People were lining up to prepay property taxes. I pre-paid the two payments that would have been due in the first half of 2018 - these are part of the 2017-18 fiscal year, so that seemed low risk.

However, the conversation around the treasurer's counter (the people behind me in line, and the people behind the counter) was that people were paying not only first half of 2018, but all of 2018-19 - all four payments. I got the impression that people WERE going to deduct the 2018-19 payments. One guy said that he had discussed this w/his accountant, and he had been advised that this was legitimate.

I'm inclined to prepay the two tax payments that will be due in the second half of next year, but I'm wondering - if I deduct these payment, what are the chances I'll be audited? And second, if I am and the deductions are disallowed, what will the consequences be?
If you have a paper bill for your 2018-19 property taxes then go ahead and pay them. I don't, so the best I can do is prepay my 2/1/18 and 5/1/18 payments, for which I DO have a bill.

And I have No Idea how the IRS is going to deal with the flood of large numbers on that line of Schedule A for the 2017 tax year. One needn't provide any proof or justification up front, so I don't see any obvious red flags for audit triggering...
Attempted new signature...

theta
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Re: Confusion about prepaying property taxes

Post by theta » Wed Dec 27, 2017 8:39 pm

My story:

I went to the County Treasurer's Office. They said I could not prepay unless I went to the Commissioner of Revenue office and got a "pre-book" ticket.
So, I went across the hall to the Commissioner of Revenue and got a pre-book ticket. I then took the pre-book ticket back to the Treasurer's office with a check to pay my 2018 real estate taxes.

Here is what the pre-book ticket states:
"Title: Memorandum Assessment of Local Levies"
"The undersigned Commissioner of Revenue has this day assessed the above taxpayer (my name & address is listed above) with the following local taxes for the tax assessment year 2018 under the provisions of Section 58.1-3920 of the Tax Code of Virginia."

Looks to me like it meets the IRS requirement, but I'll need to do a bit more research on 58.1-3920. Anybody have a different opinion? I'm all ears, thanks...

Prudence
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Re: Confusion about prepaying property taxes

Post by Prudence » Wed Dec 27, 2017 10:46 pm

I live in Montgomery County MD and the county council is allowing us to pre-pay our 2018 county real estate tax in 2017. We file a joint tax return. Until recently we were planning to take the new $24,000 standard deduction when we file the 2017 tax return. But, if we were to pre-pay the real estate tax and that causes our itemized deductions for 2017 to exceed $24,000, then we should do the pre-payment, right? IOW, we should itemize if our total deductions are => than $24,000, right?

Gray
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Re: Confusion about prepaying property taxes

Post by Gray » Wed Dec 27, 2017 10:53 pm

Hi all,

I've been reading the IRS advisory that came out today.
https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

I live in Falls Church, VA, and the treasurer recently posted an announcement:
https://www.fallschurchva.gov/treasurer

"Because Falls Church bills for real estate taxes on a fiscal year basis, taxpayers already have the amount of their installment payment that is due on June 5, 2018 -- it was on the bill they received in November. The installment due in June 2018 may be paid at any time, but tax payments will be recorded as received in 2017 only if they are delivered to the Treasurer’s office by 5:00 pm on December 29, 2017.

Taxpayers may also pre-pay their December 2018 real estate tax installment. They should estimate the tax amount based on the installment due on June 5, 2018, as the January 1, 2018 assessment data is not available yet. If citizens need help estimating what their payment will be, they should contact the Treasurer’s Office for assistance. 703-248-5046 (TTY 711) or treasurer@fallschurchva.gov."

Please weigh in on two points (I think #1 is kosher, but #2 is not--I'm seeking input):

(1) I have an invoice for the 2018 tax year that's due in two installments. The first by 12/5/17 (which I recently paid). The second by 6/5/18. On the basis of the IRS guidance, I believe that I CAN pay the second part of this assessed installment in 2017 (the one due by 6/5/18) and deduct it on my 2017 return.

(2) I COULD technically pre-pay the amount due by 12/5/18 (which has not been assessed/invoiced) using the installment due 6/5/18 as an ESTIMATE, but I believe that it would run afoul of the IRS guidance and not be an allowed as a deduction on my 2017 return.

Thanks for your help,

Gray

libralibra
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Re: Confusion about prepaying property taxes

Post by libralibra » Wed Dec 27, 2017 11:41 pm

The local politicians and media have really amped up the confusion this year by writing tons of articles and getting everyone crazy about prepaying their taxes. The rules are no different than always - you can prepay property tax installments that have already been assessed, and you can make 4th quarter estimated state income tax payments now. That's it - the politicians that are making emergency decrees to allow people to prepay estimated (unassessed) property taxes are just hurting everybody (by making them worry, stand in long lines, and also tie up their cash).

Also, if you are paying AMT this year, then neither of the above helps anyway. What you can still do is prepay your Jan 1 mortgage payment and also increase charitable contributions, if you think you get a bigger benefit itemizing them this year.

gopack13
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Re: Confusion about prepaying property taxes

Post by gopack13 » Wed Dec 27, 2017 11:59 pm

libralibra wrote:
Wed Dec 27, 2017 11:41 pm
The local politicians and media have really amped up the confusion this year by writing tons of articles and getting everyone crazy about prepaying their taxes. The rules are no different than always - you can prepay property tax installments that have already been assessed, and you can make 4th quarter estimated state income tax payments now. That's it - the politicians that are making emergency decrees to allow people to prepay estimated (unassessed) property taxes are just hurting everybody (by making them worry, stand in long lines, and also tie up their cash).

Also, if you are paying AMT this year, then neither of the above helps anyway. What you can still do is prepay your Jan 1 mortgage payment and also increase charitable contributions, if you think you get a bigger benefit itemizing them this year.
Or what about County Treasurers giving tax advice?
http://wgnradio.com/2017/12/27/dane-nea ... rty-taxes/

Cook County at least made it easy to go online and get a prepayment bill. I did that today, went to Chase on my way home and paid the first installment. My situation is that I will lose the benefit from itemizing next year with the new standard deduction, so if I can shift the property taxes to this year I'll save what I would've saved next year if the tax law didn't go into effect. I figure pay now, figure out whether or not I can actually deduct it later. I'm curious to see what's going to happen if the IRS deems everyone ineligible to do so. Given the media uproar, there are a LOT of people that are going to deduct the prepayment. Luckily mine only amounts to about $400 in savings, so even if there is some sort of audit at least I'm not the guy she mentions prepaying $1.6M in taxes...

furwut
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Re: Confusion about prepaying property taxes

Post by furwut » Thu Dec 28, 2017 8:56 am

Gray wrote:
Wed Dec 27, 2017 10:53 pm
I believe you have interpreted the IRS notice as they would have you.

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Ice-9
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Re: Confusion about prepaying property taxes

Post by Ice-9 » Thu Dec 28, 2017 9:01 am

Prudence wrote:
Wed Dec 27, 2017 10:46 pm
I live in Montgomery County MD and the county council is allowing us to pre-pay our 2018 county real estate tax in 2017. We file a joint tax return. Until recently we were planning to take the new $24,000 standard deduction when we file the 2017 tax return. But, if we were to pre-pay the real estate tax and that causes our itemized deductions for 2017 to exceed $24,000, then we should do the pre-payment, right? IOW, we should itemize if our total deductions are => than $24,000, right?
Prudence,

I also live in Montgomery County. The news has been coming in at a fast pace, but it seems we MoCo-folk will not be able to deduct prepayments in 2017 after all.

Tuesday: County reversed earlier decision and decided to allow prepayments for 2018 in 2017, with careful wording in their announcement that the IRS had not yet clarified whether prepayments would be deductible. Montgomery County said it would accept the amount of your 2017 County tax as a prepayment estimate for 2018.

Wednesday: IRS clarified that only 2017 prepayments where the homeowner has already received a tax amount for 2018 would be deductible in 2017. Since this is not the case for Montgomery County, it looks like we will not be able to deduct 2018 prepayments on our 2017 returns. All those people on local news who stood in line for 45 minutes apparently did so for nothing. https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

The $24k standard deduction for married couples starts for the 2018 tax year. For 2017, the previous $12,700 standard deduction still applies, so you likely would benefit from itemizing for 2017 from what you described.
Last edited by Ice-9 on Thu Dec 28, 2017 9:05 am, edited 2 times in total.

furwut
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Re: Confusion about prepaying property taxes

Post by furwut » Thu Dec 28, 2017 9:01 am

libralibra wrote:
Wed Dec 27, 2017 11:41 pm
The rules are no different than always - you can prepay property tax installments that have already been assessed, and you can make 4th quarter estimated state income tax payments now.
Except that, according to the reporting, one can’t deduct 2018 estimated state income tax payments on their 2017 return.

pshonore
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Re: Confusion about prepaying property taxes

Post by pshonore » Thu Dec 28, 2017 9:13 am

furwut wrote:
Thu Dec 28, 2017 9:01 am
libralibra wrote:
Wed Dec 27, 2017 11:41 pm
The rules are no different than always - you can prepay property tax installments that have already been assessed, and you can make 4th quarter estimated state income tax payments now.
Except that, according to the reporting, one can’t deduct 2018 estimated state income tax payments on their 2017 return.
Quite true but you can deduct the 4th quarter 2017 installment normally due 1/15/18 if you pay on 12/31/17 or prior because it is for 2017 taxes.

Carson
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Re: Confusion about prepaying property taxes

Post by Carson » Thu Dec 28, 2017 9:17 am

gopack13 wrote:
Wed Dec 27, 2017 11:59 pm

Or what about County Treasurers giving tax advice?
http://wgnradio.com/2017/12/27/dane-nea ... rty-taxes/

Cook County at least made it easy to go online and get a prepayment bill. I did that today, went to Chase on my way home and paid the first installment. My situation is that I will lose the benefit from itemizing next year with the new standard deduction, so if I can shift the property taxes to this year I'll save what I would've saved next year if the tax law didn't go into effect. I figure pay now, figure out whether or not I can actually deduct it later. I'm curious to see what's going to happen if the IRS deems everyone ineligible to do so. Given the media uproar, there are a LOT of people that are going to deduct the prepayment. Luckily mine only amounts to about $400 in savings, so even if there is some sort of audit at least I'm not the guy she mentions prepaying $1.6M in taxes...
Go Pack! :beer

I heard the Cook County treasurer yesterday on the radio and she only dropped the 'consult your tax/legal professional for advice' once. The rest of the time talking about how advantageous it is to prepay. And then my goodness, reading about it on facebook - it is truly horrifying how people are misinformed about taxes.

I did pay my 2018 first installment - if turns out to be deductible in 2017, it will be great and it lowers my tax due by $625. If it applies to '18, then fine, I paid a month ahead of schedule and can't itemize 2018 anyway. FWIW, this is the text of the bill that I paid:

Installment: 1st
Tax amount billed: $X
Tax Due Date: 3/1/2018
Balance Due as of 12/06/17: $X

IMO, the language of 'amount billed' and 'balance due' implies there was a legitimate liability to my household as of 12/31/17.
Last edited by Carson on Thu Dec 28, 2017 9:19 am, edited 1 time in total.
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Gopherrube1
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Re: Confusion about prepaying property taxes

Post by Gopherrube1 » Thu Dec 28, 2017 9:18 am

I live in Hennepin County (Minnesota), and they sent out a "Proposed Levies and Taxes" statement back in November which relates to proposed 2018 property taxes. It specifically says, "This is not a bill - Do not pay".

Hennepin County has since come out and said, "If you would like to prepay your 2018 property taxes, you may pay up to the amount stated in your proposed property tax notice sent in November." So, this has caused many to go and prepay 2018 property taxes like many are doing around the country based on the proposed tax amount.

However, the actual property tax statement doesn't come out until March 2018 (with payments due in May and October), which I assume is when the property tax is "assessed". Am I correct in thinking that I wouldn't be able to deduct any prepaid property taxes given these facts?

BlackStrat
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Re: Confusion about prepaying property taxes

Post by BlackStrat » Thu Dec 28, 2017 9:50 am

Ice-9 wrote:
Thu Dec 28, 2017 9:01 am
Prudence wrote:
Wed Dec 27, 2017 10:46 pm
I live in Montgomery County MD and the county council is allowing us to pre-pay our 2018 county real estate tax in 2017. We file a joint tax return. Until recently we were planning to take the new $24,000 standard deduction when we file the 2017 tax return. But, if we were to pre-pay the real estate tax and that causes our itemized deductions for 2017 to exceed $24,000, then we should do the pre-payment, right? IOW, we should itemize if our total deductions are => than $24,000, right?
Prudence,

I also live in Montgomery County. The news has been coming in at a fast pace, but it seems we MoCo-folk will not be able to deduct prepayments in 2017 after all.

Tuesday: County reversed earlier decision and decided to allow prepayments for 2018 in 2017, with careful wording in their announcement that the IRS had not yet clarified whether prepayments would be deductible. Montgomery County said it would accept the amount of your 2017 County tax as a prepayment estimate for 2018.

Wednesday: IRS clarified that only 2017 prepayments where the homeowner has already received a tax amount for 2018 would be deductible in 2017. Since this is not the case for Montgomery County, it looks like we will not be able to deduct 2018 prepayments on our 2017 returns. All those people on local news who stood in line for 45 minutes apparently did so for nothing. https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

The $24k standard deduction for married couples starts for the 2018 tax year. For 2017, the previous $12,700 standard deduction still applies, so you likely would benefit from itemizing for 2017 from what you described.
Ice9 & Prudence - check out the following site and click on "Pay or View Your Property Tax Bill Online" (in the quick links box on the right).

https://www.montgomerycountymd.gov/finance/

You can look up your prior tax bills (if you don't have copies at home) and see the assessed tax period at the top of the most current bill.

In my case it is:

TAX PERIOD 07/01/2017-06/30/2018

I'm assuming I can prepay and deduct the first 6 months of 2018 paid in the most recent bill. Let me know if you see an issue with this that I'm missing.
Last edited by BlackStrat on Thu Dec 28, 2017 10:17 am, edited 1 time in total.

Nate79
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Re: Confusion about prepaying property taxes

Post by Nate79 » Thu Dec 28, 2017 9:51 am

I wonder if tax software will have the right questions and do tax professionals truly understand the law or if all these lemmings will try and deduct property taxes without an assessed bill?

West of Chicago
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Re: Confusion about prepaying property taxes

Post by West of Chicago » Thu Dec 28, 2017 10:03 am

I'm in DuPage County, Illinois. We pay our 2017 taxes in 2018. The treasurer here allows prepayment of property taxes up to 105% of the previous year's total, so I prepaid all of my 2017 tax bill and got a receipt.

Our property was assessed in December 2017 for the 2017 tax year and the assessed value was published on the county's website. We do not yet have the tax rate for 2017 and so do not have the official bill with the total tax due. That usually comes out in April.

Does anyone have any idea if this will be enough to satisfy the new IRS requirements?

furwut
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Re: Confusion about prepaying property taxes

Post by furwut » Thu Dec 28, 2017 10:11 am

pshonore wrote:
Thu Dec 28, 2017 9:13 am
furwut wrote:
Thu Dec 28, 2017 9:01 am
libralibra wrote:
Wed Dec 27, 2017 11:41 pm
The rules are no different than always - you can prepay property tax installments that have already been assessed, and you can make 4th quarter estimated state income tax payments now.
Except that, according to the reporting, one can’t deduct 2018 estimated state income tax payments on their 2017 return.
Quite true but you can deduct the 4th quarter 2017 installment normally due 1/15/18 if you pay on 12/31/17 or prior because it is for 2017 taxes.
8-)
Wasn’t thinking.

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Ice-9
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Re: Confusion about prepaying property taxes

Post by Ice-9 » Thu Dec 28, 2017 10:48 am

BlackStrat wrote:
Thu Dec 28, 2017 9:50 am
Ice9 & Prudence - check out the following site and click on "Pay or View Your Property Tax Bill Online" (in the quick links box on the right).

https://www.montgomerycountymd.gov/finance/

You can look up your prior tax bills (if you don't have copies at home) and see the assessed tax period at the top of the most current bill.

In my case it is:

TAX PERIOD 07/01/2017-06/30/2018

I'm assuming I can prepay and deduct the first 6 months of 2018 paid in the most recent bill. Let me know if you see an issue with this that I'm missing.
Hi BlackStrat,

The issue you're missing is that this would not be a prepayment, but rather your normal payment. If you look at your Montgomery County bill, you should notice that the second payment for the period 7/1/17 to 6/30/18 is "Amount Due by 12/31/2017." You would normally pay this in 2017 and normally deduct it on your 2017 taxes.

If the County's website is showing this as not yet paid and you feel it should be paid already, don't worry, there's some lag with the County website. For example, my mortgage servicer paid the tax due 12/31 from my escrow account on 12/13, but it still shows as an amount yet to be paid on the County website.

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heartwood
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Re: Confusion about prepaying property taxes

Post by heartwood » Thu Dec 28, 2017 10:56 am


Prudence
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Re: Confusion about prepaying property taxes

Post by Prudence » Thu Dec 28, 2017 11:02 am

BlackStrat wrote:
Thu Dec 28, 2017 9:50 am
Ice-9 wrote:
Thu Dec 28, 2017 9:01 am
Prudence wrote:
Wed Dec 27, 2017 10:46 pm
I live in Montgomery County MD and the county council is allowing us to pre-pay our 2018 county real estate tax in 2017. We file a joint tax return. Until recently we were planning to take the new $24,000 standard deduction when we file the 2017 tax return. But, if we were to pre-pay the real estate tax and that causes our itemized deductions for 2017 to exceed $24,000, then we should do the pre-payment, right? IOW, we should itemize if our total deductions are => than $24,000, right?
Prudence,

I also live in Montgomery County. The news has been coming in at a fast pace, but it seems we MoCo-folk will not be able to deduct prepayments in 2017 after all.

Tuesday: County reversed earlier decision and decided to allow prepayments for 2018 in 2017, with careful wording in their announcement that the IRS had not yet clarified whether prepayments would be deductible. Montgomery County said it would accept the amount of your 2017 County tax as a prepayment estimate for 2018.

Wednesday: IRS clarified that only 2017 prepayments where the homeowner has already received a tax amount for 2018 would be deductible in 2017. Since this is not the case for Montgomery County, it looks like we will not be able to deduct 2018 prepayments on our 2017 returns. All those people on local news who stood in line for 45 minutes apparently did so for nothing. https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

The $24k standard deduction for married couples starts for the 2018 tax year. For 2017, the previous $12,700 standard deduction still applies, so you likely would benefit from itemizing for 2017 from what you described.
Ice9 & Prudence - check out the following site and click on "Pay or View Your Property Tax Bill Online" (in the quick links box on the right).

https://www.montgomerycountymd.gov/finance/

You can look up your prior tax bills (if you don't have copies at home) and see the assessed tax period at the top of the most current bill.

In my case it is:

TAX PERIOD 07/01/2017-06/30/2018

I'm assuming I can prepay and deduct the first 6 months of 2018 paid in the most recent bill. Let me know if you see an issue with this that I'm missing.
BlackStrat, I agree with you. The Wednesday guidance from IRS states the pre-payment of 2018 county real estate taxes must be based on the actual assessment and not the "estimate", so I will not pre-pay. Regarding the new $24,000 standard deduction for joint filers, I thought Trump signed the tax bill in 2017 so it would apply to the 2017 tax year. So, it appears that I was wrong about that.

Smilodon
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Re: Confusion about prepaying property taxes

Post by Smilodon » Thu Dec 28, 2017 11:23 am

Gopherrube1 wrote:
Thu Dec 28, 2017 9:18 am
However, the actual property tax statement doesn't come out until March 2018 (with payments due in May and October), which I assume is when the property tax is "assessed". Am I correct in thinking that I wouldn't be able to deduct any prepaid property taxes given these facts?
You are correct. I'm in the same seven-county metro area (not Hennepin) but am in a similar situation. I interpret the official IRS statement to mean we cannot deduct prepayment of 2018 properties tax on our 2017 taxes. It says "A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017."

I imagine being audited for my 2017 taxes and being asked to explain why my property tax deduction was roughly twice that it normally is. Prior to 2018, all I would be able to furnish is what I have right now - a proposal for 2018 property tax that literally says: This is not a Bill - Do Not Pay which to me falls under the category of "anticipated" in the IRS language above. The same document also indicates the property tax statement is coming in 2018. Therefore, I am not prepaying my 2018 property taxes in 2017 and claiming the deduction for 2017. In our particular situations, there seems to be no ambiguity that it's not allowed per the official IRS statement above.

jeremyi
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Re: Confusion about prepaying property taxes

Post by jeremyi » Thu Dec 28, 2017 11:54 am

I'm in Ramsey County as well and opted to prepay. The communication from the county and in the local papers is rather confusing if the "Proposed 2018 property tax" does not meet the requirements for being assessed.
Ramsey County also sends the 2018 Proposed Property Tax notice which directly notes "This is NOT a bill - Do Not Pay."

exarkun
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Re: Confusion about prepaying property taxes

Post by exarkun » Thu Dec 28, 2017 1:11 pm

All counties in MN send the same "Proposed taxes" statement every fall.
As said above, it says "THIS IS NOT A BILL - DO NOT PAY" which (based on the STrib and PPress) people are ignoring and pre-paying anyways.
Of course the counties are accepting pre-payments; they're getting their money almost a year early!

gilgamesh
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Re: Confusion about prepaying property taxes

Post by gilgamesh » Thu Dec 28, 2017 2:06 pm

heartwood wrote:
Thu Dec 28, 2017 10:56 am
Straight from IRS on 12/27/17

https://www.irs.gov/newsroom/irs-adviso ... id-in-2017
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.

Chip
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Re: Confusion about prepaying property taxes

Post by Chip » Thu Dec 28, 2017 2:10 pm

gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
I disagree. What's relevant is the date of the assessment. If you prepaid 2017 taxes before they are assessed, then you are paying based on an estimate. That's not an allowable deduction.

Hug401k
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Re: Confusion about prepaying property taxes

Post by Hug401k » Thu Dec 28, 2017 2:24 pm

Just to confirm, if we are paying an AMT tax, none of this matters. Correct?

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Re: Confusion about prepaying property taxes

Post by Nate79 » Thu Dec 28, 2017 2:56 pm

gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
heartwood wrote:
Thu Dec 28, 2017 10:56 am
Straight from IRS on 12/27/17

https://www.irs.gov/newsroom/irs-adviso ... id-in-2017
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
No, nothing has changed. The IRS is just reaffirming what already applied to 2017.

gilgamesh
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Re: Confusion about prepaying property taxes

Post by gilgamesh » Thu Dec 28, 2017 3:00 pm

Chip wrote:
Thu Dec 28, 2017 2:10 pm
gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
I disagree. What's relevant is the date of the assessment. If you prepaid 2017 taxes before they are assessed, then you are paying based on an estimate. That's not an allowable deduction.
Ok thanks

gilgamesh
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Re: Confusion about prepaying property taxes

Post by gilgamesh » Thu Dec 28, 2017 3:00 pm

Nate79 wrote:
Thu Dec 28, 2017 2:56 pm
gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
heartwood wrote:
Thu Dec 28, 2017 10:56 am
Straight from IRS on 12/27/17

https://www.irs.gov/newsroom/irs-adviso ... id-in-2017
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
No, nothing has changed. The IRS is just reaffirming what already applied to 2017.
Oh ok

BlackStrat
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Re: Confusion about prepaying property taxes

Post by BlackStrat » Thu Dec 28, 2017 3:35 pm

Ice-9 wrote:
Thu Dec 28, 2017 10:48 am
Hi BlackStrat,

The issue you're missing is that this would not be a prepayment, but rather your normal payment. If you look at your Montgomery County bill, you should notice that the second payment for the period 7/1/17 to 6/30/18 is "Amount Due by 12/31/2017." You would normally pay this in 2017 and normally deduct it on your 2017 taxes.

If the County's website is showing this as not yet paid and you feel it should be paid already, don't worry, there's some lag with the County website. For example, my mortgage servicer paid the tax due 12/31 from my escrow account on 12/13, but it still shows as an amount yet to be paid on the County website.
well of course you're correct - thanks for the clarification. I will not be prepaying anything.

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Re: Confusion about prepaying property taxes

Post by RustyShackleford » Fri Dec 29, 2017 1:27 am

URSnshn wrote:
Wed Dec 27, 2017 12:48 pm
I think prepaying taxes is a gamble. It may or may not pay off - no one will know until next year.
It's moot for me, as I will be unable to deduct them in 2018 in any case, because I won't be above the standard deduction - probably as long as this much increased standard deduction stays in place.

So I might as well try to deduct them in 2017. There's not much to lose - maybe some penalty interest - and a good bit to gain.

IndexRookie
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Re: Confusion about prepaying property taxes

Post by IndexRookie » Fri Dec 29, 2017 3:51 am

jeremyi wrote:
Thu Dec 28, 2017 11:54 am
I'm in Ramsey County as well and opted to prepay. The communication from the county and in the local papers is rather confusing if the "Proposed 2018 property tax" does not meet the requirements for being assessed.
Ramsey County also sends the 2018 Proposed Property Tax notice which directly notes "This is NOT a bill - Do Not Pay."
exarkun wrote:
Thu Dec 28, 2017 1:11 pm
All counties in MN send the same "Proposed taxes" statement every fall.
As said above, it says "THIS IS NOT A BILL - DO NOT PAY" which (based on the STrib and PPress) people are ignoring and pre-paying anyways.
Of course the counties are accepting pre-payments; they're getting their money almost a year early!
I too live in MN. What's interesting about those notices is tax rates have already been set. That's why you are receiving the truth in taxation notice. The reason it says it's not a bill is because of the November elections and possible school referendums that could pass that would be then additive to the notice you received.

All that said, I've read arguments that if the rates have already been set and applied then that meets the letter. For example, you can see Washington county tax rates for 2018 here: https://www.co.washington.mn.us/Documen ... View/19098

I prepaid. I file late and expect to see/hear more about this before filing season is over. If it ends up crystal clear I can'd deduct so be it, 2% interest down the drain. Worth the gamble (to me) for the possible much higher deduction.

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Re: Confusion about prepaying property taxes

Post by matt fe2o3 » Fri Dec 29, 2017 5:11 am

furwut wrote:
Wed Dec 27, 2017 5:45 pm
Looks like the IRS may be taking the hard line in allowing prepayment.
The IRS said that taxpayers can claim an additional property tax deduction when paying their 2017 taxes if they pay the tax this year and if the local tax authority has notified homeowners prior to 2018 of how much they owe in property taxes, known as a tax assessment. State and local laws vary as to when this occurs.
IRS says taxpayers trying to use deduction that will be scaled back can prepay 2018 property taxes only under limited circumstances - The Washington Post
In California we get the whole bill in Oct and we pay both pieces - basically because in one high income year we paid the second in the spring and then both sides in the fall - but you only get to do that once.

One thing about this that is great - the IRS now has a monumental task with less processors and staff than ever before.

cherijoh
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Re: Confusion about prepaying property taxes

Post by cherijoh » Fri Dec 29, 2017 7:39 am

Prudence wrote:
Wed Dec 27, 2017 10:46 pm
I live in Montgomery County MD and the county council is allowing us to pre-pay our 2018 county real estate tax in 2017. We file a joint tax return. Until recently we were planning to take the new $24,000 standard deduction when we file the 2017 tax return. But, if we were to pre-pay the real estate tax and that causes our itemized deductions for 2017 to exceed $24,000, then we should do the pre-payment, right? IOW, we should itemize if our total deductions are => than $24,000, right?
The new $24K standard deduction is for the 2018 tax year - NOT 2017. You will be paying your 2017 taxes based on the old rules.

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Re: Confusion about prepaying property taxes

Post by cherijoh » Fri Dec 29, 2017 7:48 am

matt fe2o3 wrote:
Fri Dec 29, 2017 5:11 am
One thing about this that is great - the IRS now has a monumental task with less processors and staff than ever before.
Why in the world would you think that is "great"?

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Re: Confusion about prepaying property taxes

Post by bengal22 » Fri Dec 29, 2017 7:53 am

I prepaid my property tax due in 2018 and I predict that the IRS will treat prepaid property tax the same as it has in years. I plan on including the prepayment in my deductions.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

cherijoh
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Re: Confusion about prepaying property taxes

Post by cherijoh » Fri Dec 29, 2017 8:11 am

gilgamesh wrote:
Thu Dec 28, 2017 3:00 pm
Chip wrote:
Thu Dec 28, 2017 2:10 pm
gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
I disagree. What's relevant is the date of the assessment. If you prepaid 2017 taxes before they are assessed, then you are paying based on an estimate. That's not an allowable deduction.
Ok thanks
Gilamesh, are you sure that you are using the word "assessed" properly? It seems odd to me that the taxes would be assessed in arrears. If you have an official bill, then your taxes have been assessed even if the county will accept a payment in 2018 without levying a penalty. On the other hand, some localities send out advance notice of what they think the next year's taxes will be, but it hasn't actually been assessed. Those should be labeled "This is not a bill" or "Do not pay".

My property taxes are paid on a calendar year basis. The 2017 bill date was in July, with a "due date" of Sep 1, 2017. But the bill shows another field "Amount due before" with a date of January 6, 2018. If you pay after the latter date, you will have to pay a penalty. (I paid my 2017 taxes several months ago). I always thought the wording was weird, but now I understand the reason for separate "due date" and "pay before" dates.

RetiredNow
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Re: Confusion about prepaying property taxes

Post by RetiredNow » Fri Dec 29, 2017 8:22 am

Gray wrote:
Wed Dec 27, 2017 10:53 pm
Hi all,

I've been reading the IRS advisory that came out today.
https://www.irs.gov/newsroom/irs-adviso ... id-in-2017

I live in Falls Church, VA, and the treasurer recently posted an announcement:
https://www.fallschurchva.gov/treasurer

"Because Falls Church bills for real estate taxes on a fiscal year basis, taxpayers already have the amount of their installment payment that is due on June 5, 2018 -- it was on the bill they received in November. The installment due in June 2018 may be paid at any time, but tax payments will be recorded as received in 2017 only if they are delivered to the Treasurer’s office by 5:00 pm on December 29, 2017.

Taxpayers may also pre-pay their December 2018 real estate tax installment. They should estimate the tax amount based on the installment due on June 5, 2018, as the January 1, 2018 assessment data is not available yet. If citizens need help estimating what their payment will be, they should contact the Treasurer’s Office for assistance. 703-248-5046 (TTY 711) or treasurer@fallschurchva.gov."

Please weigh in on two points (I think #1 is kosher, but #2 is not--I'm seeking input):

(1) I have an invoice for the 2018 tax year that's due in two installments. The first by 12/5/17 (which I recently paid). The second by 6/5/18. On the basis of the IRS guidance, I believe that I CAN pay the second part of this assessed installment in 2017 (the one due by 6/5/18) and deduct it on my 2017 return.

(2) I COULD technically pre-pay the amount due by 12/5/18 (which has not been assessed/invoiced) using the installment due 6/5/18 as an ESTIMATE, but I believe that it would run afoul of the IRS guidance and not be an allowed as a deduction on my 2017 return.

Thanks for your help,

Gray
Hi Gray,

I'm a fellow resident of the Little City. :)

I agree with your conclusions (#1 and #2).

Our city property tax year runs July 1 - June 30. We have an assessment and tax bill in hand for the tax year that runs July 2017 through June 2018, and there are two payment deadlines. One in December 2017 for half of the assessed liability and then one in June of 2018 for the remaining half of the assessed liability. The entire liability is known to the penny (including the payment due by June 2018). It can all be paid in December 2017 and, in my view and following the IRS guidance, is deductible on 2017 federal and state tax returns.

However, there is not yet an real estate assessment or a tax rate set for the tax year that begins in July 2018. So, although the city treasurer is accepting payments for any possible liability for future tax years (including the one that begins July 2018), payments for such future liability don't meet the standards laid out by the IRS, and shouldn't be deductible on 2017 federal or state taxes. Payments of the yet-unknown real estate tax for that tax year (and the first installment of that liability, which is due December 2018), will not be deductible on 2017 taxes, even if made this month.

Similarly, when I went to the treasurer's office to make my real estate tax payment (due June 2018) a number of people were also 'prepaying' their car tax bill, which will be due October 2018, even though it hasn't been assessed yet. I don't believe that will be deductible on 2017 federal or state taxes either.

Caveat: I'm neither a tax lawyer nor a CPA, but this seems pretty clear-cut, in our case.

-RetiredNow

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Re: Confusion about prepaying property taxes

Post by my2swedes » Fri Dec 29, 2017 8:42 am

Hug401k wrote:
Thu Dec 28, 2017 2:24 pm
Just to confirm, if we are paying an AMT tax, none of this matters. Correct?
It depends....
First, your state income taxes might be lower if you prepay your property taxes. if you have a state income tax, if they allow you to deduct property taxes, and if you would itemize this year but not next year, then depending on other rules you might pay lower overall state income taxes by accelerating your property tax payment into this year.

Second, even under AMT, prepaying may lower your federal taxes if you have a lot of realized capital gains .... I find this one hard to explain, but FIREChief and MarkNYC have posted about it elsewhere with a pretty good explanation. See thread “can someone explain how the AMT works?”
If your AMT liability hasn’t resulted from large capital gains realizations, then I think you’re right, and your federal taxes won’t go down due to accelerating your property tax payment Into this month. You would really need to run it through a tax calculator to see. I’m subject to AMT, but TurboTax showed that my federal and state taxes both went down when I tested accelerating my property tax payment into 2017. Again, in my case, it was related to having large capital gains realizations.

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Re: Confusion about prepaying property taxes

Post by gilgamesh » Fri Dec 29, 2017 9:20 am

cherijoh wrote:
Fri Dec 29, 2017 8:11 am
gilgamesh wrote:
Thu Dec 28, 2017 3:00 pm
Chip wrote:
Thu Dec 28, 2017 2:10 pm
gilgamesh wrote:
Thu Dec 28, 2017 2:06 pm
Thanks...it looks like it's only relevant to 2018 property taxes...I prepaid my 2017 property taxes which is not assessed till March of 2018. It looks like prepaying 2017 property taxes prior to assessement is fine.
I disagree. What's relevant is the date of the assessment. If you prepaid 2017 taxes before they are assessed, then you are paying based on an estimate. That's not an allowable deduction.
Ok thanks
Gilamesh, are you sure that you are using the word "assessed" properly? It seems odd to me that the taxes would be assessed in arrears. If you have an official bill, then your taxes have been assessed even if the county will accept a payment in 2018 without levying a penalty. On the other hand, some localities send out advance notice of what they think the next year's taxes will be, but it hasn't actually been assessed. Those should be labeled "This is not a bill" or "Do not pay".

My property taxes are paid on a calendar year basis. The 2017 bill date was in July, with a "due date" of Sep 1, 2017. But the bill shows another field "Amount due before" with a date of January 6, 2018. If you pay after the latter date, you will have to pay a penalty. (I paid my 2017 taxes several months ago). I always thought the wording was weird, but now I understand the reason for separate "due date" and "pay before" dates.
We have not received and statement/invoice/bill of any sort for 2017...we never do...we only get one invoice the following March. However, they accept estimated payments for 2017 even in 2017.

I paid my 2016 property taxes in March 2017. That's typical...then I deduct that in 2017 taxes.

But this year I paid my 2017 property taxes last week as they accept payments, but now that it's not acceptable, I wonder whether I have to get a refund from my county, so at least I can use part of it for tax year 2018.

That's my question now...if I paid my 2017 property taxes in December 2017, and I get that assessment/invoice in 2018, can I deduct the payment in 2018 tax return.

P.S: I will go home and check all the relevant 6 month period... the invoiced I got in March 2016 may have overlapped into 2017, which would be awesome...I always pay for 12 months...if the invoice I got in March,2017 overlapped into 2017 then I might be good...I will check

cherijoh
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Re: Confusion about prepaying property taxes

Post by cherijoh » Fri Dec 29, 2017 9:54 am

gilgamesh wrote:
Fri Dec 29, 2017 9:20 am

We have not received and statement/invoice/bill of any sort for 2017...we never do...we only get one invoice the following March. However, they accept estimated payments for 2017 even in 2017.

I paid my 2016 property taxes in March 2017. That's typical...then I deduct that in 2017 taxes.

But this year I paid my 2017 property taxes last week as they accept payments, but now that it's not acceptable, I wonder whether I have to get a refund from my county, so at least I can use part of it for tax year 2018.

That's my question now...if I paid my 2017 property taxes in December 2017, and I get that assessment/invoice in 2018, can I deduct the payment in 2018 tax return.

P.S: I will go home and check all the relevant 6 month period... the invoiced I got in March 2016 may have overlapped into 2017, which would be awesome...I always pay for 12 months...if the invoice I got in March,2017 overlapped into 2017 then I might be good...I will check
The whole "pay property taxes early" furor is because of several elements in the new tax bill:
  • The limit of $10K going forward for state and local taxes (which includes state income taxes, local real estate and person property taxes) - some portion of your taxes may literally not be deductible in the future depending on your personal circumstances
  • The new higher standard deduction which means that it won't make sense to itemize in the future - so the taxes won't count towards a bigger deduction even though they may still be deductible if you haven't hit the $10K max
  • You may be in a lower marginal tax bracket in the future - so any deduction is worth less in 2018 and future years than it would be 2017

gilgamesh
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Re: Confusion about prepaying property taxes

Post by gilgamesh » Fri Dec 29, 2017 10:35 am

cherijoh wrote:
Fri Dec 29, 2017 9:54 am
gilgamesh wrote:
Fri Dec 29, 2017 9:20 am

We have not received and statement/invoice/bill of any sort for 2017...we never do...we only get one invoice the following March. However, they accept estimated payments for 2017 even in 2017.

I paid my 2016 property taxes in March 2017. That's typical...then I deduct that in 2017 taxes.

But this year I paid my 2017 property taxes last week as they accept payments, but now that it's not acceptable, I wonder whether I have to get a refund from my county, so at least I can use part of it for tax year 2018.

That's my question now...if I paid my 2017 property taxes in December 2017, and I get that assessment/invoice in 2018, can I deduct the payment in 2018 tax return.

P.S: I will go home and check all the relevant 6 month period... the invoiced I got in March 2016 may have overlapped into 2017, which would be awesome...I always pay for 12 months...if the invoice I got in March,2017 overlapped into 2017 then I might be good...I will check
The whole "pay property taxes early" furor is because of several elements in the new tax bill:
  • The limit of $10K going forward for state and local taxes (which includes state income taxes, local real estate and person property taxes) - some portion of your taxes may literally not be deductible in the future depending on your personal circumstances
  • The new higher standard deduction which means that it won't make sense to itemize in the future - so the taxes won't count towards a bigger deduction even though they may still be deductible if you haven't hit the $10K max
  • You may be in a lower marginal tax bracket in the future - so any deduction is worth less in 2018 and future years than it would be 2017
Yes! I am aware of all of these...that's why it helps me so much to pay 2017 property taxes now and deduct in 2017 return...even, if it not has been assessed yet...

I pay no local taxes, very little state taxes and property taxes a little more than $10k....so, if I pay 2017 property taxes now, I can do this.

In 2018, make a partial 2018 property tax payment in 2018 so the sum of that and my state tax is $10k

In 2019, I will have to pay the balance of 2018 property taxes, but pay enough of 2019 property taxes too, so those two plus state income tax is less than $10k...I may be able to do that even in 2020....by 2021 my mortgage interest will be so low, I will rather use the standard 24K deduction...

I've looked at my numbers...it works well...but it looks like I may not even be able to pay 2017 property taxes in 2017 unless it's assessed.

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Re: Confusion about prepaying property taxes

Post by nlindster » Fri Dec 29, 2017 12:37 pm

[quote=newkidontheblock post_id=3682983 time=1514293841 user_id=7481]
We live in hennepin county in MN.
Last year we did itemize our deductions so we were about to deduct $37000 for state and local taxes.
I am not even sure we will itemize this year due to $10000 cap.

We currently escrow our property taxes. Our lender does allow us to cancel our escrow account.
We received our estimated property tax for 2018 in November.
I checked hennepin count website and they had this statement.

Prepay your 2018 property taxes
If you would like to prepay your 2018 property taxes, you may pay up to the amount stated in your proposed property tax (Truth in taxation) notice sent in November.
See the 2018 pre-payment method section of this page for instructions on making pre-payment.

I am not sure if they have added this statement after tax law changed or if they say this every year.
They do accept online property tax payments.

Our accountant has gone dark as he may to super busy. I am trying to determine if it is worth it for us to cancel our escrow and prepay property taxes.
[/quote]

I too am in Hennepin County and wonder if you heard back from your tax accountant? :-)

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dodecahedron
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Re: Confusion about prepaying property taxes

Post by dodecahedron » Fri Dec 29, 2017 1:18 pm

dodecahedron wrote:
Mon Dec 25, 2017 8:12 pm
pshonore wrote:
Mon Dec 25, 2017 12:02 pm
Good point - I wonder many how local tax collectors will get those warrants issued by Friday and better those mail payments no later than early Sat morning on the 30th as there very little mail pickup on Sundays. On the other hand, outside of this board, the vast majority have no idea. I know its in the newspaper as well but my experience is very few read newspapers anymore.
I think this is all over the TV stations, and folks are Facebook sharing, but even before this year, lots of folks in my small town in upstate NY were routinely taking advantage of this, even without any special publicity.

For many years, the Receiver of Taxes in my small town (population approximately 20,000) has printed up and mailed out bills a few days before Dec 31. They may not always arrive in people's mailboxes before the last business day of December (particularly when 12/31 falls on a weekend), but tax-savvy folk know that they can just show up at town hall on the last couple of business days of the old year and her staff will happily print out a duplicate bill so they can date-stamp the bill PAID if the taxpayers want to do this.

In the past, I have sometimes found this helpful for deduction-bunching (alternating with standard deduction) and it is clear from my conversations with the Tax Receiver's staff that I am far from alone in doing this. (Of course, I will say that I live in a very smart, highly educated, and generally savvy town. Lots of scientists and engineers here. Also one of the co-authors of The Millionaire Next Door lives here.)

Incentives for paying early are greater than usual this year. I predict there will be lines of folks at the Receiver's office this week.
Update: My prediction came true. There have been steady lines to pay taxes in my town (and other nearby towns) according to local media. My town announced Wednesday morning that they were prepared to accept payments from anyone who wanted to pay their January tax bill. I went to town hall to pay my bill this morning. The Receiver of Taxes said that 1500 of the town's 8500 property owners had already been in in person to pay their tax bills (and they would be open for another seven hours today.) Plus, some folks have called in to get the amount of their bills and were planning to mail in checks.

Having seen the news photos of long lines at local town halls, I was pleasantly surprised at the efficiency of the process. As soon as I arrived, someone asked me my address. By the time I had fished my checkbook and pen out of my bag, my property tax bill with the exact amount due was placed in front of me. By the time I had written my check, the person with the PAID stamp was ready to take my check and date stamp my copy of the bill. In and out of there in less than five minutes (including time to ask the Receiver of Taxes about how many people had already paid.)

I feel reasonably confident that I can deduct this on my 2017 Schedule A and it will stand up to audit if it comes to that. Although the bill is due on 1/31/2018 (in the sense that payments after that point will involve a late fee), the bill itself is dated 12/31/2017 and the PAID date-stamp is 12/29/2017.

It looks like my town is going to save a chunk of change on their postage bill this year, since all these December in person payments will reduce the number of bills they need to mail out.

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Re: Confusion about prepaying property taxes

Post by NorCalDad » Fri Dec 29, 2017 1:49 pm

mrc wrote:
Wed Dec 27, 2017 3:19 pm
Small Law Survivor wrote:
Wed Dec 27, 2017 3:00 pm
Just got back from the treasurer/assessor's office in my town, where it's the rare person that doesn't itemize.

People were lining up to prepay property taxes. I pre-paid the two payments that would have been due in the first half of 2018 - these are part of the 2017-18 fiscal year, so that seemed low risk.

However, the conversation around the treasurer's counter (the people behind me in line, and the people behind the counter) was that people were paying not only first half of 2018, but all of 2018-19 - all four payments. I got the impression that people WERE going to deduct the 2018-19 payments. One guy said that he had discussed this w/his accountant, and he had been advised that this was legitimate.

I'm inclined to prepay the two tax payments that will be due in the second half of next year, but I'm wondering - if I deduct these payment, what are the chances I'll be audited? And second, if I am and the deductions are disallowed, what will the consequences be?
Hoping someone can say whether how to handle these prepayment property tax deductions lies solely with the IRS, or if Congress must/could pass a "fix" to the bill to make it clear one way or the other. I don't know what would happen if the IRS disallows these deductions, but you sure as heck won't be alone. 8-)
At this point, this is my only concern, that Congress could pass a "fix" that only allows deductions based on due date. The IRS statement that came out Wednesday was comforting to those of us in California because they basically used California's long-time billing system as the example of what can be deducted. Taxpayers here have long accelerated that spring payment as a form of tax planning when they realized they needed to reduce taxable income at the end of the calendar year.

What the IRS seemed to suggest was not deductible were instances of jurisdictions going out of their way to produce quick assessments or bills this week - or even just tell people to pay what they think they'll owe in 2018. I think those are the cases that will draw scrutiny, but maybe accountants, tax lawyers and state attorneys general will figure out a way to defend the practice.

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