CNBC quotes IRS on terms of deductibility of prepaid property taxes

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RootSki
Posts: 17
Joined: Mon Feb 20, 2017 11:52 am

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by RootSki » Thu Dec 28, 2017 3:08 pm

So how does the "assessment" work in the real world?

Does the county send the IRS a list of property assessment dates?

tedclu
Posts: 180
Joined: Fri Feb 06, 2015 3:13 pm

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by tedclu » Thu Dec 28, 2017 3:18 pm

exarkun wrote:
Thu Dec 28, 2017 1:14 pm
tedclu wrote:
Thu Dec 28, 2017 11:19 am
In the exact same boat, going down to the county and asking for a bill at lunch.


Gopherrube1 wrote:
Thu Dec 28, 2017 9:27 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".

Let us know if they give you a real bill. I doubt it, since school levies in many MN counties were just votes on this fall...

No bill yet.

But the property value was assessed on jan2 2017. All the tax meetings are done by now. So they do have the final numbers, just need to tell people they are final now rather than next March.

MikeG62
Posts: 768
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: IRS clarifies 2018 property tax prepayment

Post by MikeG62 » Thu Dec 28, 2017 5:19 pm

Buffetologist wrote:
Thu Dec 28, 2017 12:43 pm
MikeG62 wrote:
Thu Dec 28, 2017 12:04 pm
Buffetologist wrote:
Thu Dec 28, 2017 11:31 am
tfb wrote:
Thu Dec 28, 2017 11:09 am
MikeG62 wrote:
Thu Dec 28, 2017 8:03 am
So if Buffetologist has a tax bill in hand, pays that bill prior to Jan 1 and his/her township accepts the payment as settlement of the tax liability and not a deposit, I think this fits the IRS guidance and should be deductible. After all, how is this taxpayer not liable for the tax imposed? The fact that there is a true-up mechanism in the following year would not appear to make the taxpayer not liable for the amounts already billed. At the very least, it would seem worth taking the position that it is deductible and defending to the IRS on audit (in the very, very unlikely event that even becomes necessary) - I would.
The problem is Buffetologist does not have a tax bill in hand. Buffetologist only anticipates there will be a bill due on 8/1/2018 and another due on 11/1/2018 and Buffetologist can estimate with high accuracy what the amounts will be, but there is nothing official from the local government that Buffetologist owes those amounts at this time. Another thing to consider is what the "record date" of ownership will those anticipated bills be based on? If Buffetologist ceases to be the property owner on 1/1/2018, will Buffetologist still owe the 8/1/2018 and 11/1/2018 payments? If not, those anticipated bills have not been imposed on Buffetologist yet.
My current tax bill contains the full amount of the Dec 2017 assessment. It invoices the Q3 (2/1/18) and Q4 (5/1/18) due dates which is equal to the total December 2017 assessment minus the 8/1/17 and 11/1/17 payments which were based on last year's assessment, and determines to the penny, the exact amount of taxes owed by the Q1 (8/1/18) and Q2 (11/1/18) due dates (the Dec 2017 assessment divided by 4). It is not an estimate.

The determining question is whether the assessment or the invoice imposes the tax?
Do you have payment vouchers (and a printed bill and/or tax assessment) which show the amounts due on Aug 1, 2018 and Nov 1, 2018? Or are you simply stating that when you do get a bill with vouchers for those dates, it will be for the same amounts as for the Feb 1 and May 1 2018 vouchers?
The person in the tax collectors office told me that when I get the bills with vouchers for 8/1/18 and 11/1/18, the quarterly amount will be precisely the amount of the December 2017 assessment divided by 4. They calculated this for me. The bills due 2/1/18 and 5/1/18 are larger because the bills due 8/1/17 and 11/1/17 were precisely equal to the amount of the December 2016 assessment divided by 4. The amount paid for 8/1/17 and 11/1/17 is subtracted from the December 2017 assessment. The result is divided by 2 and that becomes the 2/1/18 and 5/1/18 coupons which are invoiced in December 2017.
I get that you know now what the amounts will be for the first two payments (Aug and Nov 2018). However, there is no assessment nor payment vouchers that exist now covering the period during which those payments will be made. Thus, you would not appear to meet the IRS guidance which requires that the tax has been assessed for that period and that you are liable now for those payments.

How could you possibly be liable now for something which has not yet even been billed?

I believe your situation is much closer to the fact pattern the IRS gave in example #2 than the fact pattern in example #1.

Buffetologist
Posts: 335
Joined: Sun Aug 22, 2010 8:58 am

Re: IRS clarifies 2018 property tax prepayment

Post by Buffetologist » Thu Dec 28, 2017 6:31 pm

MikeG62 wrote:
Thu Dec 28, 2017 5:19 pm
Buffetologist wrote:
Thu Dec 28, 2017 12:43 pm
MikeG62 wrote:
Thu Dec 28, 2017 12:04 pm
Buffetologist wrote:
Thu Dec 28, 2017 11:31 am
tfb wrote:
Thu Dec 28, 2017 11:09 am

The problem is Buffetologist does not have a tax bill in hand. Buffetologist only anticipates there will be a bill due on 8/1/2018 and another due on 11/1/2018 and Buffetologist can estimate with high accuracy what the amounts will be, but there is nothing official from the local government that Buffetologist owes those amounts at this time. Another thing to consider is what the "record date" of ownership will those anticipated bills be based on? If Buffetologist ceases to be the property owner on 1/1/2018, will Buffetologist still owe the 8/1/2018 and 11/1/2018 payments? If not, those anticipated bills have not been imposed on Buffetologist yet.
My current tax bill contains the full amount of the Dec 2017 assessment. It invoices the Q3 (2/1/18) and Q4 (5/1/18) due dates which is equal to the total December 2017 assessment minus the 8/1/17 and 11/1/17 payments which were based on last year's assessment, and determines to the penny, the exact amount of taxes owed by the Q1 (8/1/18) and Q2 (11/1/18) due dates (the Dec 2017 assessment divided by 4). It is not an estimate.

The determining question is whether the assessment or the invoice imposes the tax?
Do you have payment vouchers (and a printed bill and/or tax assessment) which show the amounts due on Aug 1, 2018 and Nov 1, 2018? Or are you simply stating that when you do get a bill with vouchers for those dates, it will be for the same amounts as for the Feb 1 and May 1 2018 vouchers?
The person in the tax collectors office told me that when I get the bills with vouchers for 8/1/18 and 11/1/18, the quarterly amount will be precisely the amount of the December 2017 assessment divided by 4. They calculated this for me. The bills due 2/1/18 and 5/1/18 are larger because the bills due 8/1/17 and 11/1/17 were precisely equal to the amount of the December 2016 assessment divided by 4. The amount paid for 8/1/17 and 11/1/17 is subtracted from the December 2017 assessment. The result is divided by 2 and that becomes the 2/1/18 and 5/1/18 coupons which are invoiced in December 2017.
I get that you know now what the amounts will be for the first two payments (Aug and Nov 2018). However, there is no assessment nor payment vouchers that exist now covering the period during which those payments will be made. Thus, you would not appear to meet the IRS guidance which requires that the tax has been assessed for that period and that you are liable now for those payments.

How could you possibly be liable now for something which has not yet even been billed?

I believe your situation is much closer to the fact pattern the IRS gave in example #2 than the fact pattern in example #1.
The December 2017 assessment exists now and that is what determines the 8/1 and 11/1 amounts, the December assessment divided by 4.

Does the assessment or the invoice impose the tax?

MikeG62
Posts: 768
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Location: New Jersey

Re: IRS clarifies 2018 property tax prepayment

Post by MikeG62 » Thu Dec 28, 2017 7:39 pm

Buffetologist wrote:
Thu Dec 28, 2017 6:31 pm
MikeG62 wrote:
Thu Dec 28, 2017 5:19 pm
Buffetologist wrote:
Thu Dec 28, 2017 12:43 pm
MikeG62 wrote:
Thu Dec 28, 2017 12:04 pm
Buffetologist wrote:
Thu Dec 28, 2017 11:31 am


My current tax bill contains the full amount of the Dec 2017 assessment. It invoices the Q3 (2/1/18) and Q4 (5/1/18) due dates which is equal to the total December 2017 assessment minus the 8/1/17 and 11/1/17 payments which were based on last year's assessment, and determines to the penny, the exact amount of taxes owed by the Q1 (8/1/18) and Q2 (11/1/18) due dates (the Dec 2017 assessment divided by 4). It is not an estimate.

The determining question is whether the assessment or the invoice imposes the tax?
Do you have payment vouchers (and a printed bill and/or tax assessment) which show the amounts due on Aug 1, 2018 and Nov 1, 2018? Or are you simply stating that when you do get a bill with vouchers for those dates, it will be for the same amounts as for the Feb 1 and May 1 2018 vouchers?
The person in the tax collectors office told me that when I get the bills with vouchers for 8/1/18 and 11/1/18, the quarterly amount will be precisely the amount of the December 2017 assessment divided by 4. They calculated this for me. The bills due 2/1/18 and 5/1/18 are larger because the bills due 8/1/17 and 11/1/17 were precisely equal to the amount of the December 2016 assessment divided by 4. The amount paid for 8/1/17 and 11/1/17 is subtracted from the December 2017 assessment. The result is divided by 2 and that becomes the 2/1/18 and 5/1/18 coupons which are invoiced in December 2017.
I get that you know now what the amounts will be for the first two payments (Aug and Nov 2018). However, there is no assessment nor payment vouchers that exist now covering the period during which those payments will be made. Thus, you would not appear to meet the IRS guidance which requires that the tax has been assessed for that period and that you are liable now for those payments.

How could you possibly be liable now for something which has not yet even been billed?

I believe your situation is much closer to the fact pattern the IRS gave in example #2 than the fact pattern in example #1.
The December 2017 assessment exists now and that is what determines the 8/1 and 11/1 amounts, the December assessment divided by 4.

Does the assessment or the invoice impose the tax?
I’ll take one last shot at this.

I know you want to see it that way, but I don’t think the IRS will (should you get audited).

Just because you know how much the August and November 2018 payments will be (because of the mechanics of how your township handles billing) does not mean the assessment for the period July 2018-Jun 2019 exists. By point of fact, it does not exist - you know that. You will get the assessment in December 2018 and the tax for the period July 2018 - June 2019 will only be known at that time. Then mechanically, the township will subtract from that assessment the amounts previously invoiced (which were clearly estimates or placeholder amounts) and determine the amount of the remaining two payments.

So not only do you not meet the “tax must be assessed” requirement, but you are not liable now for those (Aug and Nov 2018) payments. How does knowing the amount of the payments make you liable now?

If you disagree, I’d like to know what you would say to the IRS on audit when they asked how you met that second (liable now) standard.

Taking your position to its extreme, why stop at the Nov 2018 payment? Why not include amounts payable after that? The only difference between the amounts to be paid in Aug/Nov 2018 and Feb/May 2019 is that you don’t know “precisely” the amount (but you know you are going to be billed). Surely you could make a reasonable estimate? Here again, it would seem to me you are no more liable today for the 2019 payments then you are for the Aug and Nov 2018 payments.

chicagoan23
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by chicagoan23 » Thu Dec 28, 2017 7:43 pm

logiclife wrote:
Thu Dec 28, 2017 2:29 pm
Not too sure about what you are saying coz the irs guidance could be interpreted as, you can't just deduct taxes that are not billed to you by just prepaying..regardless of what year you are paying for.

Unless someone thinks otherwise..
The assessment process is different from the billing process, and the assessment process is typically a function of state law. The billing and collection of assessed taxes is the last step in the property tax process, not the first.

There are at least three bases that I see for claiming a deduction for 2017 taxes that aren’t due until 2018:

1. 2017 taxes are assessed in accordance with the procedures outlined under state law during 2017, and are typically billed and due in 2018. If you pay 2017 taxes in 2017, you are not prepaying taxes. You are paying taxes on property that has been assessed, but paying them before they are due.

2. The recent IRS guidance makes clear that 2018 taxes that are assessed in 2018 are not deductible if paid in 2017. But it notably did not reference 2017 taxes that are due and paid in 2018. It was written that way for a reason.

3. The actual law (rather than interpretive guidance from an administrative agency) provides that payments of 2018 state and local income taxes that are due in 2018 cannot be claimed as a deduction if paid in 2017, and instead will be treated as if paid in 2018. Congress could have easily included property taxes in that rule, and chose not to. A canon of statutory construction is that provisions included in legislative text were included for a reason, and provisions excluded were excluded for a reason. The IRS would lose in court if it tried to argue otherwise now.

Pay those property taxes with confidence....2017 taxes are deductible if paid this year.

chicagoan23
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Joined: Thu Jan 29, 2015 4:34 pm

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by chicagoan23 » Thu Dec 28, 2017 7:50 pm

From Illinois law:
County Collector -- Deadline: May 1st of Following Year
The County Collector prints and mails the tax bills. Typically this takes place during the last week of April, in the year following the assessment year. The bill is payable in two installments, with the first being normally due on June 1st, and the second becoming due on September 1st. (35 ILCS 200/Title 7)
The bill is issued IN THE YEAR FOLLOWING THE ASSESSMENT YEAR under Illinois law. I can’t see how the IRS can say 2017 taxes weren’t assessed in 2017, even though they are billed in 2018.

cdaddio23
Posts: 5
Joined: Sun Feb 15, 2015 10:58 pm

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by cdaddio23 » Thu Dec 28, 2017 8:39 pm

Edited chicagoan had already answered my question
Last edited by cdaddio23 on Thu Dec 28, 2017 9:07 pm, edited 1 time in total.

Buffetologist
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Re: IRS clarifies 2018 property tax prepayment

Post by Buffetologist » Thu Dec 28, 2017 9:01 pm

MikeG62 wrote:
Thu Dec 28, 2017 7:39 pm
Buffetologist wrote:
Thu Dec 28, 2017 6:31 pm
MikeG62 wrote:
Thu Dec 28, 2017 5:19 pm
Buffetologist wrote:
Thu Dec 28, 2017 12:43 pm
MikeG62 wrote:
Thu Dec 28, 2017 12:04 pm


Do you have payment vouchers (and a printed bill and/or tax assessment) which show the amounts due on Aug 1, 2018 and Nov 1, 2018? Or are you simply stating that when you do get a bill with vouchers for those dates, it will be for the same amounts as for the Feb 1 and May 1 2018 vouchers?
The person in the tax collectors office told me that when I get the bills with vouchers for 8/1/18 and 11/1/18, the quarterly amount will be precisely the amount of the December 2017 assessment divided by 4. They calculated this for me. The bills due 2/1/18 and 5/1/18 are larger because the bills due 8/1/17 and 11/1/17 were precisely equal to the amount of the December 2016 assessment divided by 4. The amount paid for 8/1/17 and 11/1/17 is subtracted from the December 2017 assessment. The result is divided by 2 and that becomes the 2/1/18 and 5/1/18 coupons which are invoiced in December 2017.
I get that you know now what the amounts will be for the first two payments (Aug and Nov 2018). However, there is no assessment nor payment vouchers that exist now covering the period during which those payments will be made. Thus, you would not appear to meet the IRS guidance which requires that the tax has been assessed for that period and that you are liable now for those payments.

How could you possibly be liable now for something which has not yet even been billed?

I believe your situation is much closer to the fact pattern the IRS gave in example #2 than the fact pattern in example #1.
The December 2017 assessment exists now and that is what determines the 8/1 and 11/1 amounts, the December assessment divided by 4.

Does the assessment or the invoice impose the tax?
I’ll take one last shot at this.

I know you want to see it that way, but I don’t think the IRS will (should you get audited).

Just because you know how much the August and November 2018 payments will be (because of the mechanics of how your township handles billing) does not mean the assessment for the period July 2018-Jun 2019 exists. By point of fact, it does not exist - you know that. You will get the assessment in December 2018 and the tax for the period July 2018 - June 2019 will only be known at that time. Then mechanically, the township will subtract from that assessment the amounts previously invoiced (which were clearly estimates or placeholder amounts) and determine the amount of the remaining two payments.

So not only do you not meet the “tax must be assessed” requirement, but you are not liable now for those (Aug and Nov 2018) payments. How does knowing the amount of the payments make you liable now?

If you disagree, I’d like to know what you would say to the IRS on audit when they asked how you met that second (liable now) standard.

Taking your position to its extreme, why stop at the Nov 2018 payment? Why not include amounts payable after that? The only difference between the amounts to be paid in Aug/Nov 2018 and Feb/May 2019 is that you don’t know “precisely” the amount (but you know you are going to be billed). Surely you could make a reasonable estimate? Here again, it would seem to me you are no more liable today for the 2019 payments then you are for the Aug and Nov 2018 payments.
Exactly when do I become liable for the 8/1/18 payment?
a) The December 2017 assessment when the amount of that payment is determined exactly
b) The June 2018 billing which puts that value on a piece of paper and mails it to me
c) The December 2018 assessment which determines the fiscal year tax rate.

If it's (c) as you say, how can they ask me to pay a tax in August for which I am not yet liable.
If it's (b) it's not an assessment, just a bill. The assessment was the previous December.
Therefore I think it's (a).

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tfb
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Re: IRS clarifies 2018 property tax prepayment

Post by tfb » Thu Dec 28, 2017 9:35 pm

Buffetologist wrote:
Thu Dec 28, 2017 9:01 pm
Exactly when do I become liable for the 8/1/18 payment?
a) The December 2017 assessment when the amount of that payment is determined exactly
b) The June 2018 billing which puts that value on a piece of paper and mails it to me
c) The December 2018 assessment which determines the fiscal year tax rate.

If it's (c) as you say, how can they ask me to pay a tax in August for which I am not yet liable.
If it's (b) it's not an assessment, just a bill. The assessment was the previous December.
Therefore I think it's (a).
You haven't told us if you sold the property today who would owe the payments on 8/1/2018 and 11/1/2018. If it's you, you have a shot. If the June 2018 billing is based on ownership as of say March 1, then you become liable only in 2018. You know the amount on those bills. Are you sure as of now your name will be on those bills?
Harry Sit, taking a break from the forums.

Buffetologist
Posts: 335
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Re: IRS clarifies 2018 property tax prepayment

Post by Buffetologist » Thu Dec 28, 2017 9:48 pm

tfb wrote:
Thu Dec 28, 2017 9:35 pm
Buffetologist wrote:
Thu Dec 28, 2017 9:01 pm
Exactly when do I become liable for the 8/1/18 payment?
a) The December 2017 assessment when the amount of that payment is determined exactly
b) The June 2018 billing which puts that value on a piece of paper and mails it to me
c) The December 2018 assessment which determines the fiscal year tax rate.

If it's (c) as you say, how can they ask me to pay a tax in August for which I am not yet liable.
If it's (b) it's not an assessment, just a bill. The assessment was the previous December.
Therefore I think it's (a).
You haven't told us if you sold the property today who would owe the payments on 8/1/2018 and 11/1/2018. If it's you, you have a shot. If the June 2018 billing is based on ownership as of say March 1, then you become liable only in 2018. You know the amount on those bills. Are you sure as of now your name will be on those bills?
Not sure how this helps, but from my town:
"Property tax assessments are billed on a fiscal year basis, from July 1 to June 30, with an effective date of the previous January 1. This means that the owner as of January 1 should legally appear on the tax bill - for example, for Fiscal Year 2017 the effective date is January 1, 2016."

I also found this
https://www.mass.gov/files/documents/20 ... nfaq_0.pdf

Which I don't know how to interpret to answer my question.

I appreciate all replies, obviously I'm thick.

Nearly A Moose
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Nearly A Moose » Thu Dec 28, 2017 9:53 pm

Have only skimmed this thread, but FYI, DC had said that it's 2018 taxes have been assessed and fall under scenario 1:

https://cfo.dc.gov/service/prepay-2018- ... operty-tax
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

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tfb
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Re: IRS clarifies 2018 property tax prepayment

Post by tfb » Thu Dec 28, 2017 10:07 pm

Buffetologist wrote:
Thu Dec 28, 2017 9:48 pm
tfb wrote:
Thu Dec 28, 2017 9:35 pm
Buffetologist wrote:
Thu Dec 28, 2017 9:01 pm
Exactly when do I become liable for the 8/1/18 payment?
a) The December 2017 assessment when the amount of that payment is determined exactly
b) The June 2018 billing which puts that value on a piece of paper and mails it to me
c) The December 2018 assessment which determines the fiscal year tax rate.

If it's (c) as you say, how can they ask me to pay a tax in August for which I am not yet liable.
If it's (b) it's not an assessment, just a bill. The assessment was the previous December.
Therefore I think it's (a).
You haven't told us if you sold the property today who would owe the payments on 8/1/2018 and 11/1/2018. If it's you, you have a shot. If the June 2018 billing is based on ownership as of say March 1, then you become liable only in 2018. You know the amount on those bills. Are you sure as of now your name will be on those bills?
Not sure how this helps, but from my town:
"Property tax assessments are billed on a fiscal year basis, from July 1 to June 30, with an effective date of the previous January 1. This means that the owner as of January 1 should legally appear on the tax bill - for example, for Fiscal Year 2017 the effective date is January 1, 2016."

I also found this
https://www.mass.gov/files/documents/20 ... nfaq_0.pdf

Which I don't know how to interpret to answer my question.

I appreciate all replies, obviously I'm thick.
From your link, page 8, question 28:
For example, fiscal year 2016 taxes were assessed to the owner of record as of
January 1, 2015 which is six months before the July 1, 2015 beginning of fiscal year 2016.
Adding a few years: fiscal year 2019 taxes were assessed to the owner of record as of January 1, 2018 which is six months before the July 1, 2018 beginning of fiscal year 2019. Your December 2017 assessment was for fiscal year July 1, 2017 to June 30, 2018. The 8/1/2018 and 11/1/2018 preliminary payments for fiscal year July 1, 2018 to June 30, 2019 are liability of the owner as of January 1, 2018, which isn't you yet as of 12/31/2017.
Harry Sit, taking a break from the forums.

slowmoney
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by slowmoney » Thu Dec 28, 2017 10:12 pm

So, you pre-pay your real estate taxes and claim them and the IRS rules against you. You have just commit fraud against the US Government. You are now liable for fines, penalties, interest charges, repayment of refund, and payment of extra taxes on the taxable income. Plus, it is my experience the IRS does not just “let these things go”. Once they have a legitimate reason to audit you….it drags on and on…. It seems that there are real consequences to this.
Information is more valuable sold than used. - Fischer Black (1938-1995)

Spirit Rider
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Spirit Rider » Thu Dec 28, 2017 10:18 pm

Acting in good faith on best available information is most certainly not tax fraud.

It is simply a tax filing error that happen millions of times. Yes it may be subject to penalties which are almost always just (rather low) interest charges.

Lighten up on the hyperbole.

Buffetologist
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Buffetologist » Fri Dec 29, 2017 5:12 am

@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.

gilgamesh
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by gilgamesh » Fri Dec 29, 2017 5:53 am

So, now what happens to those who prepaid without an assessment? Do I have to get a refund and then send a check in 2018 so at least some of it (within $10k SALT), can be deducted in 2018? Or is it ok if I paid in 2017 but assessement (in my case for year 2017, as my county lags a year behind) for 2017 will only come in 2018? Basically can I claim in 2018 tax return, for assessement made in 2018 but check paid and cleared in 2017?

Thanks!

chw
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by chw » Fri Dec 29, 2017 8:03 am

Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.

Buffetologist
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Buffetologist » Fri Dec 29, 2017 8:30 am

chw wrote:
Fri Dec 29, 2017 8:03 am
Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.
I concur. According to tfb and the link I posted from mass.gov, you became liable for taxes through 6/30/18 on 1/1/17.

henrikk
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by henrikk » Fri Dec 29, 2017 8:32 am

Personally I think there is a good chance that Congress with pass legislation that all property taxes paid in 2017 are deductible. If enough people get angry on an essentially non-partisan issue (prepaying property taxes, not the tax bill itself), Congress often tends takes action. A lot of people are getting angry and confused over this issue.

MikeG62
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Location: New Jersey

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by MikeG62 » Fri Dec 29, 2017 8:36 am

chw wrote:
Fri Dec 29, 2017 8:03 am
Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.
Although I do not live in MA, I will add my thoughts because I have posted quite a bit in this thread.

The IRS requirement is that the tax (1) has been assessed and (2) paid prior to January 1, 2018. So you meet both of those requirements and I think you are fine.

Having the bills in hand is an additional helpful factor in trying to prove you were liable for the tax prior to January 1, 2018. However, in my view it is not the single most important piece of evidence in demonstrating liability. The assessment is key (as the IRS has said). The fact that your township allows the payment of taxes to be spread over time is helpful and makes it easier for taxpayers to pay their taxes. However, I would say this is more akin to interest free financing than setting the date of the liability. It does not mean you cannot pay the entire assessment earlier. Your town has in fact modified its systems to allow for payment in 2017 and is crediting the payment against your tax due. I truly believe you are on solid ground here.

NYC_Guy
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by NYC_Guy » Fri Dec 29, 2017 8:51 am

slowmoney wrote:
Thu Dec 28, 2017 10:12 pm
So, you pre-pay your real estate taxes and claim them and the IRS rules against you. You have just commit fraud against the US Government. You are now liable for fines, penalties, interest charges, repayment of refund, and payment of extra taxes on the taxable income. Plus, it is my experience the IRS does not just “let these things go”. Once they have a legitimate reason to audit you….it drags on and on…. It seems that there are real consequences to this.
Except it doesn’t work that way. If you have a reasonable basis for your position, but you ultimately lose the point, you have not committed fraud.

chw
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by chw » Fri Dec 29, 2017 9:02 am

MikeG62 wrote:
Fri Dec 29, 2017 8:36 am
chw wrote:
Fri Dec 29, 2017 8:03 am
Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.
Although I do not live in MA, I will add my thoughts because I have posted quite a bit in this thread.

The IRS requirement is that the tax (1) has been assessed and (2) paid prior to January 1, 2018. So you meet both of those requirements and I think you are fine.

Having the bills in hand is an additional helpful factor in trying to prove you were liable for the tax prior to January 1, 2018. However, in my view it is not the single most important piece of evidence in demonstrating liability. The assessment is key (as the IRS has said). The fact that your township allows the payment of taxes to be spread over time is helpful and makes it easier for taxpayers to pay their taxes. However, I would say this is more akin to interest free financing than setting the date of the liability. It does not mean you cannot pay the entire assessment earlier. Your town has in fact modified its systems to allow for payment in 2017 and is crediting the payment against your tax due. I truly believe you are on solid ground here.
Thanks Mike & Bufeet for your thoughts. Happy New Year!

pshonore
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by pshonore » Fri Dec 29, 2017 9:28 am

MikeG62 wrote:
Fri Dec 29, 2017 8:36 am
chw wrote:
Fri Dec 29, 2017 8:03 am
Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.
Although I do not live in MA, I will add my thoughts because I have posted quite a bit in this thread.

The IRS requirement is that the tax (1) has been assessed and (2) paid prior to January 1, 2018. So you meet both of those requirements and I think you are fine.

Having the bills in hand is an additional helpful factor in trying to prove you were liable for the tax prior to January 1, 2018. However, in my view it is not the single most important piece of evidence in demonstrating liability. The assessment is key (as the IRS has said). The fact that your township allows the payment of taxes to be spread over time is helpful and makes it easier for taxpayers to pay their taxes. However, I would say this is more akin to interest free financing than setting the date of the liability. It does not mean you cannot pay the entire assessment earlier. Your town has in fact modified its systems to allow for payment in 2017 and is crediting the payment against your tax due. I truly believe you are on solid ground here.
I tend to disagree. I received a local property tax bill in July 2017, payable 1/2 in July and the other half in January 2018. That money is used to run the local government from July 1, 2017 thru June 30, 2018. It was based on the "Grand List" as of 10/01/2016 and a mill rate set in the Spring of 2017. The Grand List was based on individual assessments completed during 2015 (and which will be used to compile Grand Lists through 2020 at which time all assessments will be recalculated). Unless your local authorities have set a mill rate and issued bills, the tax has not been imposed

Chip
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Chip » Fri Dec 29, 2017 9:29 am

henrikk wrote:
Fri Dec 29, 2017 8:32 am
Personally I think there is a good chance that Congress with pass legislation that all property taxes paid in 2017 are deductible. If enough people get angry on an essentially non-partisan issue (prepaying property taxes, not the tax bill itself), Congress often tends takes action. A lot of people are getting angry and confused over this issue.
My opinion is that the chance of Congress passing such a law is essentially zero. The fact is that NOTHING has changed in the law about whether or not prepayments made in 2017 are deductible. The law and IRS interpretation of it is the same as it has been for dozens of years.

If the IRS chooses to audit 2017 returns with extremely high property tax deductions they probably won't even get started on it until late in 2019. Most people will have completely forgotten about what they deducted when they filed in April of 2018. There will be a new Congress in place for almost a year. I doubt they'll have the stomach to pass a tax law affecting decisions made two years prior.

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jazman12
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Re: IRS clarifies 2018 property tax prepayment

Post by jazman12 » Fri Dec 29, 2017 9:45 am

cykj wrote:
Wed Dec 27, 2017 5:54 pm
LINK: https://www.washingtonpost.com/news/bus ... 90a456ed84

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.

Great - I just paid the estimate this morning
Your not alone. Timing on the late timing of the notification was extremely unfair since many news outlets were encouring homeowners to prepay without notice to non-allowances for estimates vs. actual
Act soon... time is running out

The Wizard
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Location: Reading, MA

Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by The Wizard » Fri Dec 29, 2017 11:06 am

pshonore wrote:
Fri Dec 29, 2017 9:28 am
MikeG62 wrote:
Fri Dec 29, 2017 8:36 am
chw wrote:
Fri Dec 29, 2017 8:03 am
Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
I also live in MA. Last week, I took the approach that a "safe harbor" on prepaying my real estate taxes would be to only prepay the 3rd and 4th quarter 2018 fiscal year bill due on 2/1, and 5/1/2018. The town accepted an on-line payment, as I am away for the holidays.

My town does not formally bill (with a mailed paper bill) the 2/1/2018 bill until 1/1, and the 5/1/2018 4th quarter bill until late March/early April. The town Treasurer took in the online payments via a previous bill posting on my account, as the 3rd and 4th quarter bills weren't posted on line yet. Any thoughts from those of you in MA about the deductibility of these payments since actual paper bills hadn't been printed and mailed out (though the amounts were known and communicated verbally) would be appreciated.

I also read today's Globe article, which seems to interpret that all MA municipalities are considered to announce the fiscal 2018 real estate bill beginning on 7/1/2017, so if the municipality accepts payment at any time for this fiscal year (through 6/30/2018), any accepted payment should be deductible, regardless of the bill actually being sent prior to 1/1/2018.
Although I do not live in MA, I will add my thoughts because I have posted quite a bit in this thread.

The IRS requirement is that the tax (1) has been assessed and (2) paid prior to January 1, 2018. So you meet both of those requirements and I think you are fine.

Having the bills in hand is an additional helpful factor in trying to prove you were liable for the tax prior to January 1, 2018. However, in my view it is not the single most important piece of evidence in demonstrating liability. The assessment is key (as the IRS has said). The fact that your township allows the payment of taxes to be spread over time is helpful and makes it easier for taxpayers to pay their taxes. However, I would say this is more akin to interest free financing than setting the date of the liability. It does not mean you cannot pay the entire assessment earlier. Your town has in fact modified its systems to allow for payment in 2017 and is crediting the payment against your tax due. I truly believe you are on solid ground here.
I tend to disagree. I received a local property tax bill in July 2017, payable 1/2 in July and the other half in January 2018. That money is used to run the local government from July 1, 2017 thru June 30, 2018. It was based on the "Grand List" as of 10/01/2016 and a mill rate set in the Spring of 2017. The Grand List was based on individual assessments completed during 2015 (and which will be used to compile Grand Lists through 2020 at which time all assessments will be recalculated). Unless your local authorities have set a mill rate and issued bills, the tax has not been imposed
The discussion above was on the Massachusetts way of doing property taxes. Each of the 351 cities and towns in MA collects their own property taxes. There is no county involvement.

And the bills I receive for the 8/1 and 11/1 payments are estimates based on previous year. Tax rate in my town is set after 11/1 and the bills for 2/1 and 5/1 are adjusted to account for that rate over the whole fiscal year.

That's how it's done in MA and Reading specifically. Don't try to apply this system to every other state...
Attempted new signature...

mipo777
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by mipo777 » Fri Dec 29, 2017 11:48 am

Another Minnesota person here. I decided just to pay it & hope. I figure worst case scenario I lose out on a few months of 2% interested. Best case scenario I save $1300 on taxes. The juice seemed to be worth the squeeze to me.

libralibra
Posts: 164
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by libralibra » Fri Dec 29, 2017 1:13 pm

henrikk wrote:
Fri Dec 29, 2017 8:32 am
Personally I think there is a good chance that Congress with pass legislation that all property taxes paid in 2017 are deductible. If enough people get angry on an essentially non-partisan issue (prepaying property taxes, not the tax bill itself), Congress often tends takes action. A lot of people are getting angry and confused over this issue.
I wouldn't count on it. Even the main "Confusion about prepaying property taxes" thread here had it correct right from the day the Bill passed (incl a quote from Pub 17 and then 10 posts later a quote from a tax court decision that spelled it out even more clearly).

It's really the emergency decrees and news articles that drove the mania, which dropped the ball by not doing enough due diligence. E.g. if you read the NY gov's decree https://www.governor.ny.gov/sites/gover ... EO_172.pdf , it sounds like he wanted to do a bit of political grandstanding, and now that's going to end up costing people.

Yes, there will be anger and a lot of finger pointing, but the stories (and Congress members) will just blame the confusion on "the other side".

Buffetologist
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Re: CNBC quotes IRS on terms of deductibility of prepaid property taxes

Post by Buffetologist » Sat Dec 30, 2017 9:32 am

Buffetologist wrote:
Fri Dec 29, 2017 5:12 am
@tfb and @MikeG62, thank you so much for this discussion. I believe you are correct and the citation in the Massachusetts guide I linked makes it crystal clear. There is an article in today's Boston Globe this morning that seems to also agree with you.
Just to close out, for the record, our Town's tax collector told the press that the prepayments that I paid for the 8/1 and 11/1 bills will be held in an escrow account an applied when those taxes get assessed. So that pretty much clarifies that those payments won't be legally deductible and that I'm out about $36 in after tax interest that the money would have earned in my Ally Savings account for 8 and 11 months.

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