Prepaid 2018 property taxes

[mikeo24]

There's a stampede at the local tax collector's office of people who think they can prepay their 2018 property taxes and deduct on 2017 Schedule A. They can't do this, correct?

[kathyc2]

I would say that depends on how you interpret the bill specifically as to what defines "imposed" and also which state is involved.

[TaxGuyBill]

If the county accepts it, it should be deductible.

[kathyc2]

This is the verbiage from new bill: "For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed."



The bill specifies income tax, so I'd say RE tax prepay is safe. Business Insider has the same opinion. http://www.businessinsider.com/prepa...passes-2017-12

[JON]

State or local income tax imposed for a taxable year beginning after December 31, 201

The key word there is STATE AND LOCAL INCOME TAX -which I think has always been in the regs. MN is a big ?, CA evidently has said pay us now and get the deduction.

[JON]

The

Last part is referring to real estate taxes - which are not an income tax. Man I have to go and be Santa's helper. Real estate taxes still may be controlled by the State interpretation. HOPING here

[mikeo24]

Prepaid 2018 property taxes

Learned something new tonight, property taxes are billed in arrears. Property tax billed in early 2018 for 2nd half of 2017 can be paid and deducted on 2017 federal return. property taxes for 2018 cannot be prepaid in 2017 and deducted on 2017 federal return.

[TAXNJ]

Similar to 2016

see TTB post below:

http://forum.thetaxbook.com/showthread.php?26388-Prepaid-Real-Property-Taxes&highlight=Prepaid+real+estate+tax

[WICPA]

State income taxes

My problem is with clients who have already paid their 2018 state income tax before the law was passed. The state has already accepted their payments and issued them exemptions from withholding for 2018. They are not getting the benefit of the higher standard deduction or the lower rates of 2018 but are being punished for doing normal tax planning. This has been a common practice for many of my clients for years and since it is time critical to get payments in to be processed before the end of the year I normally start the process in early December as soon as the state makes the prepayment vouchers available. They should not be able to make retroactive changes to them. Anyone else suffering from this?

[kathyc2]

My problem is with clients who have already paid their 2018 state income tax before the law was passed. The state has already accepted their payments and issued them exemptions from withholding for 2018. They are not getting the benefit of the higher standard deduction or the lower rates of 2018 but are being punished for doing normal tax planning. This has been a common practice for many of my clients for years and since it is time critical to get payments in to be processed before the end of the year I normally start the process in early December as soon as the state makes the prepayment vouchers available. They should not be able to make retroactive changes to them. Anyone else suffering from this?

Guess you could advise your clients to make daily calls to their rep and Senator expressing their profound displeasure!

[taxea]

IRS says you can only deduct the portion of 2018 that has already been assessed. I don't know about other states but Hawaii sends a notice that specifically states it is not a bill (no tax amount included) and also an assessment that shows what is owing for the 2nd installment of year one and the 1st installment of year two.

[rtsietsema]

Varies by State?

I’m sure this debate on RE taxes will carry on for quite some time, when was it assessed?, when was it paid? Etc.

Thinking that it will vary by State, and then perhaps even by various taxing districts (counties), I wonder if anyone has an opinion for the State of Minnesota? Here below is the relevant State statute, which virtually guarantees that taxes are levied prior to the start of the next year. Either by the new levy being acted upon, or by default to the prior year’s levy.

Do you interpret that to mean RE taxes paid in Minnesota prior to the end of 2017 would be an allowable deduction?

2017 Minnesota Statutes

275.07 CITY, TOWN, COUNTY, AND SCHOOL DISTRICT TAXES.
§Subdivision 1.Certification of levy. (a) Except as provided under paragraph (b), the taxes voted by cities, counties, school districts, and special districts shall be certified by the proper authorities to the county auditor on or before five working days after December 20 in each year. A town must certify the levy adopted by the town board to the county auditor by September 30 each year. If the town board modifies the levy at a special town meeting after September 30, the town board must recertify its levy to the county auditor on or before five working days after December 20. If a city, town, county, school district, or special district fails to certify its levy by that date, its levy shall be the amount levied by it for the preceding year.

[TaxGuyBill]

Yes, it will vary by State.

However, I don't think that is an applicable Statute. That seems to just show the deadline for schools, cities, etc. to submit their information to the County Auditor. The County Auditor then "compute tax rates" in January.

http://www.house.leg.state.mn.us/hrd/pubs/ss/ssptadm.pdf

As a fellow Minnesotan, I don't think the 'assessment of tax' is until at least January 2nd (the "assessment"/valuation is done the previous January 2nd). In other words, prepayment is not deductible.

[dtlee]

There are all kinds of crazy end runs occurring.

A relative, who lives in NY, said that Gov. Cuomo has "authorized" the local counties to collect 2018 tax payments prior to 01/01/2018.

But, of course, those taxes are neither assessed nor billed until 01/01/2018 at the earliest, which means (at least per stated IRS guidelines) any payment of such in 2017 would not be a valid 2017 Schedule A deduction.

However, the folks are lined up there to prepay and some counties even have a "drop box" system where you can safely deposit your payment check up to midnight on 12/31/2017 without dealing with the postal service.

It will be interesting to see what "verbiage" is printed either on the 2017 Schedule A or in the instructions for same as to what IS an allowable property tax payment. Joe Kitchen Table tax guy will likely include everything and other somewhat more professional tax preparers may end up having some words with their clients. "But they said on TV I could deduct those early payments!!!" etc.

FE

And, when all else fails, this December 27th notice from the IRS explains things quite well!
https://www.irs.gov/newsroom/irs-adv...d-paid-in-2017

Your points are quite valid, but it is not as straightforward as you indicate.

My town, for example, assesses property taxes for 2017-2018 on December 1, 2017. Hence, any payments towards that bill are for an assessed amount, even though they permit payment of the first half in January and the second half in May. In other words, homeowners in my town who prepay their taxes are paying an assessed tax. Other municipalities use different dates which may or may not cross a year and may assess school taxes separately from general taxes.

The executive order signed by the governor allowed jurisdictions to issue warrants for 2018 taxes early if they so desired. The issue is whether such a warrant (which would create a taxpayer debt based on the value of their property) would be the legal equivalent of an assessment. In some cases, the assessments were already computed and would have been properly assessed in January. In one notable scenario, the County of Nassau usually assesses taxes due on January 2, but their county executive signed the warrants on December 26. Even if these warrants constitute an assessment, there is still a question of whether or not a taxpayer who paid taxes on December 26 before the signing or on December 22 when the Governor signed his executive order should be allowed a deduction for these specific taxes.

Couple the above with the diverse taxing authorities we have and it becomes unclear how any tax preparer would know which tax payments were or were not validly assessed.

I am a kitchen table preparer.

I am also an enrolled agent with more than 35 years of experience not only preparing taxes but also teaching courses including SEE preparation courses. Your perjorative remarks about such preparers are not too different from my earlier disparaging remarks about a Congress that thinks that it is wise to make major tax changes with fewer than 10 days for the IRS and the population to react.

[Will]

Here in our county in NYS, the 2018 town/county taxes were assessed and billed on or before December 29. We did have several thousand people at various towns pre-pay their taxes. To avoid the problem mentioned below, no payments were accepted before the 29th. Based on the statement by the IRS, I will not have a problem deducting these payments on the 2017 return.