Prepaid 2018 Real Estate taxes paid in 2017. Is it a 2017 write off?

[David7548]

I am doing a return on extension where the taxpayer prepaid their 2018 Real Estate tax in 2017. This was not done on my advise, nor was I questioned. The governor of NY advised NY residents to prepay their taxes to claim them in 2017. I am under the impression that the IRS does not recognize prepaid expenses (taxes) as current year expense whether on the cash or accrual basis. They are recognized as a current asset.

Do you have a take on how the IRS is receiving this. Are they allowing prepayment of taxes as a current year (2017) expense.

THANKS

[Rapid Robert]

I am doing a return on extension where the taxpayer prepaid their 2018 Real Estate tax in 2017.

Per instructions for Schedule A, "Only taxes assessed and paid in 2017 can be deducted for 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."

So we need your answer to whether or not the taxes that were paid in 2017, had already been assessed and represented an existing liability for the owner. For example, in some places, the property tax fiscal year is July - June, with payment due in December and April of the same time period. Paying the April payment in December would be tax deductible, because owner was liable at that time.

[New York Enrolled Agent]

I am doing a return on extension where the taxpayer prepaid their 2018 Real Estate tax in 2017. This was not done on my advise, nor was I questioned. The governor of NY advised NY residents to prepay their taxes to claim them in 2017. I am under the impression that the IRS does not recognize prepaid expenses (taxes) as current year expense whether on the cash or accrual basis. They are recognized as a current asset.

Do you have a take on how the IRS is receiving this. Are they allowing prepayment of taxes as a current year (2017) expense.

Answer = it depends

IRS issued IR-2017-210 which might be helpful to read.

Real estates are deductible by those on which the taxes are "imposed". In NYS taxes are imposed (assessments made) at varying times determined by county of residence.

I live in Suffolk County where taxes are assessed on December 1 (the tax bill actually says Taxes Become a Lien on December 1) for the year. In Suffolk County, the tax year runs from December 1 through November 30. Thus any taxpayer here could have paid their "2018" taxes in December of 2017 and have full deductibility for 2017. Other counties have different rules - you need to determine when the tax was assessed. Mere payment of non-assessed 2018 real estate taxes would not be deductible in 2017 despite the comments by the governor.