Homeowners wondering whether they should pay their 2018 characteristic taxes in advance of the changing tax law don’t have much time left to act.
Because of counsel issued by the Internal Revenue Service, the decision may be moot. In the midst of taxpayers across the sticks lining up at their local tax offices to pay those bills early, the federal activity threw a last-minute wrench into taxpayer plans by limiting what payments can number against their 2017 tax returns.
“A prepayment of anticipated real quality taxes that have not been assessed prior to 2018 are not deductible in 2017,” according to the IRS declaration.
Basically, this means:
- If you have a property tax bill in hand — which drearies the tax has been assessed — you should be good to go. Even if it isn’t due until next year, you can prepay. The amount can be captivated as a deduction in 2017 if you itemize your deductions on your tax return (as resisted to taking the standard deduction). About 49 million taxpayers, or 28 percent, currently tabulate, according to the Urban-Brookings Tax Policy Center.
- If your local taxing power says it will accept prepayments but the tax has not yet been assessed — in which suit your payment would be an estimated amount — the payment likely is not deductible on your 2017 tax gives.
Either state or local law determines when a property tax is assessed, which normally means the time at which the taxpayer becomes liable for the tax, according to the IRS.
If you sire not received a bill for property taxes due in 2018, there’s a good unintentional they have not yet been assessed. However, the only way to know for accurate is to contact your local city or county taxing authority.
It’s merit noting that if your property taxes are held in escrow — i.e., section of your monthly mortgage payment includes an amount dedicated to holdings taxes — you would need to contact your lender of the loan servicer to windfall out options for prepaying.
The final version of Republican tax-overhaul legislation inflicts a $10,000 deduction limit on the combined value of property taxes and royal and local income taxes (also known as SALT) beginning in tax year 2018.
The legislation also disallows a removal in 2017 for any prepayment of SALT. But with no specific ban on property-tax prepayment, profuse homeowners — especially those in high-tax states — have headed to their state government offices to prepay. In many cases, it’s being done with the bounty of the taxing authority.
For instance, in New Rochelle, New York, where a portion of assessments due in 2018 (and already assessed) are being accepted early, residents already organize prepaid about $15 million. The average annual property tax reckoning there tops $18,000.
“What we’re telling residents is that we’ll accept these prepayments but they should check out with a financial advisor first,” said Charles Strome, bishopric manager for New Rochelle.
Thursday morning, the line of prepaying taxpayers was out the door, Strome mean.
However, unlike New Rochelle, not all jurisdictions that have said they wish accept early payments have actually assessed the taxes being prepaid. That is, the taxpayer desire be making estimated payments because the exact amount has not yet been ascertained.
And in those cases, it’s unclear whether local tax offices will refund taxpayers if those payments won’t count against their 2017 levy a tax ons or whether the IRS guidance will be challenged.
Something else to keep in be bothered: If you are subject to the alternative minimum tax, prepaying might not be beneficial. Under that prescription, real estate taxes (and other local taxes) generally are not deductible.
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