One provision of the new tax law is a limit of $10,000 on the property tax deduction. If you pay your property taxes before Dec. 31, and it's more than $10,000, you can deduct the entire amount on your 2017 taxes. You'll be limited to a $10,000 deduction on 2018 taxes.

Of course, this will be a temporary infusion of cash that will be curtailed in 13 months, but who looks that far ahead anymore?

So if you live in a state with high real estate taxes and high income and sales taxes, you're screwed.

But property taxes are the only one taxpayers can pre-pay. I guess that "local control" notion is a little more fungible than Republicans make it sound sometimes.

state and local taxes paid in 2017 can be deducted from federal income taxes in 2017.
there's no cap on this deduction for 2017 (other than the limit of your adjusted gross income and possibly some alternative minimum tax effects)

however, there's a $10,000 limit on this deduction starting in 2018.

so if your state and local income taxes are more than that in 2018, it may be a good idea to prepay what you can (estimated state income taxes and/or local property taxes, e.g.) in 2017.

If you can't deduct them in 2018, you are effectvely pre-paying them at a lower rate if you pay them in 2017.

You are paying them with pre-tax money in 2017, rather than post-tax money if you pay them in 2018. That means that if you wait until next year, and you are in a 15% marginal tax bracket, you can pay $100 in taxes from your gross income this year (and owe no federal taxes on it this year), or pay it with $117.65 from your gross income next year. (The added $17.65 go to pay the additional federal taxes you will owe on the $100 next year.) As your marginal tax rate goes up, the cost of waiting until 2018 to pay them goes up more).

It limits their destructibility for high income tax payers. So if you prepay them in 2017 while the old law is still in effect you can deduct them fully.

One of the highest taxed counties in the nation, Westchester.

[link:http://www.lohud.com/story/money/personal-finance/taxes/david-mckay-wilson/2017/12/26/no-prepayment-westchester-county-taxes/982682001/|]

[link:http://www.lohud.com/story/news/politics/albany/2017/12/22/prepaying-your-property-taxes/976608001/http://|]

We will see if the bills showup

Let's say your property taxes (municipal, school, county) are $16,000 annually. If you pay next year, you can only deduct $10,000, leaving you with $6,000 added onto your wages, etc. which is then used to calculate how much federal tax you'll have to pay.

So, instead of adding $6,000 that not only did you NOT earn, but paid for already, you pay today -- or at least before 4:00 p.m. this Friday. You can pay the $6,000 or the full $16,000 (if you have it on hand). This way, you have a win/win for 2017-2018. For 2017, you have $32,000 deduction for the property taxes for two years ($16,000 x 2) and you won't have to pay extra federal tax on the balance of your municipal tax after deducting the $10,000 in 2018. And assuming Congress (either party) doesn't change Taxscam after 2018, the true impact would be felt for the tax year of 2019.

(and not for lack of trying).

Because you don't OWE your 2018 taxes yet (you can prepay any 2017 taxes that aren't due until next year), you're essentially making a gift or loan, rather than paying a liability. Therefore, while you State or locality may let you, they're not eligivle for a SALT deduction on next year's taxes.

Last edited Wed Dec 27, 2017, 06:59 PM - Edit history (1)

for property taxes or sales taxes in the TCJA.

https://finance.yahoo.com/news/faq-can-prepay-taxes-2018-181936174.html

I saw an H&R Block article that said the same thing, but apparently didn't save it.

I've been paying my 4th quarter state income tax estimated tax payment in December rather than in January (January 15 is the due date in most years) so that I can deduct it from my federal this year rather than next year.

E.g. I paid 2016 4th quarter payment in late December 2016 rather than waiting for the January 15, 2017 due date, and therefore deducted it from my 2016 federal taxes. Although I realize that this is not the same thing as paying 2017 tax year taxes in 2016, since the January 15, 2017 payment (both federal and state) is considered Q4 2016 taxes.

On Edit: BREAKING: IRS says 2018 property taxes are deductible only if assessed and paid in 2017
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=10030106

There can't be any guesstimate of the amount.

...but the principle applies; you CANNOT prepay 2018 property taxes UNLESS your tax office has assessed them. You need to contact them directly to see if that's possible.

November 10 and the second installment due April 10. (Each installment represents one-half of the total Tax Bill for the year. If you don't pay the first installment by the Nov 10th due date it's late and there is a 10% late penalty. You can pay your total Tax bill (both installments) by the November 10 date and be done with it. I have an impounds account, so my 1st installment has already been paid last month by my Mortgage holder. But if I choose to pay my 2nd payment before the end of December, I will get to claim 3 payments for 2017 since I would be claiming the April 2017 payment (officially the 2nd installment from the prior year, plus my Nov 2017th and April 2018th payment. I expect my State Taxes to be less in 2017 because I retired in January of this year and only had one month of income in 2017, and I don't plan to start drawing my retirement benefits until June of 2018.

I also am considering relocating in 2018 to either Georgia (where I already own a second home) or Florida. Both have state property taxes which are much lower than those in California, while Florida in addition has no state income taxes. I'm looking for a beach condo in Florida that I can rent out most of the year and it can pay for itself. I will also be able to claim almost 100% of my rental expenses including Mortgage interest, Taxes and Insurance, HOA Fees, Cleaning fees, Depreciation and Utilities if I use it less than 14 days a year. If I use it more I can only write off a prorata share of the expenses. I would like to be able to use it at least 14 days (2 separate weeks during the offseason) since the beaches are less crowded during that time anyway and that's my favorite time to go, and that way I can maximize my rental income. I can't imagine living at the beach 100% of the time, but I'd like to have a place at the beach where we can visit with our kids and family, and we can pass it on to our children and my grandchildren as a family business.

I can't imagine how expensive a house you would own to have to pay $16k in taxes each and every year.

Then to have so much extra cash to be able to prepay it a whole year ahead of time.

Why should we be concerned with rich people's deductions? Is it because they live in blue states?

that's not that rich though it is well above median.

You can easily exceed the 10K limit for property and state tax with a modest home in the Chicago area.

My entire mortgage payment and property taxes combined aren't even 12K a year. I don't ever come even close to itemizing at tax time.

Don't understand how the services in other states require over 5x more in property taxes than what we receive here in our state. Are the streets paved in gold?

Westchester County, NY (mentioned above) has insane property taxes. They also have more school districts than the state of Maryland.

I grew up (and went to public school there) there in a town of about two square miles (about 6000 population then). There were 4 other school districts within 5 miles of me. Each high school class graduated about 100.

and its property taxes were around $20,000 a year.

A similarly priced house in Alabama had property tax of around $3,000 a year.

Yes, blue states are getting screwed.

Is the level of services so outstanding that people feel like they are getting what they pay for ? I honestly can't understand why someone with a 700K home who was OK with a 20K annual property tax would get that bent out of shape about not being able to deduct all of it. Much less having enough extra cash around to want to prepay a year ahead of time.

I would be more angry as to why the tax was 20K a year in the first place. That is double what I pay for my entire house and taxes combined

Add to that high assessed values and homeowners are hurting.
Here in Maine we deal with harsh winters that tear up roads, which need constant repair. We have small scattered communities which each need fire and police depts, leading to duplication of services. And we have no major industrial tax base.

community. Bedroom communities don't have the high value/large commercial properties which can generate a lot more tax revenue than residential properties.

It was in the NYT. Has house prices and annual taxes listed. I was astonished by the difference in taxes for identically priced homes.

https://www.nytimes.com/2017/12/20/realestate/700000-homes-south-carolina-new-york-alabama.html?action=click&contentCollection=Real%20Estate&pgtype=imageslideshow&module=RelatedArticleList&region=CaptionArea&version=SlideCard-1

Them because rent is ALSO so darned much - 1500 for a studio, 2.5-3 k for a one bedroom... that they’re trying to build equity. The whole equation isn’t going to work do well, and no they’re not rich- we just spend more like 40-50% of income on housing here. When you grow up here, it’s normal and you don’t want to leave. But also salaries used to be higher here. Doesn’t seem the case anymore. The whole thing is untenable.

Florida tax collectors want residents to know this: No, you cannot prepay your 2018 property taxes.

Tax collectors in communities nationwide are seeing a spike in people wanting to prepay their property taxes before 2018 — in an effort to take advantage of tax breaks that will soon be limited under the new federal tax law that goes into effect Monday.

In Pasco County, Tax Collector Mike Fasano estimates that in the past week, his offices have received nearly 100 inquiries from residents who want to know if they can pay now.

The Florida Tax Collector’s Association released a memo Friday in an attempt to clear up the confusion.

http://www.tampabay.com/news/business/personalfinance/Officials-To-residents-rushing-to-pay-2018-property-taxes-before-the-new-year-don-t-_163944129

Last edited Wed Dec 27, 2017, 06:58 PM - Edit history (2)

for those in the 15% and 25% marginal tax brackets in 2017 will be in the 12% and 22% tax brackets respectively in 2018. (Roughly speaking - it's not a perfect match on the income brackets)

So for people in these tax brackets, a deduction in 2017 saves more than one in 2018.

Example: I have about $1,000 property taxes.

I'm in the 15% tax bracket in 2017. If I deduct the $1,000 in 2017, it saves me $150 in federal taxes.

But If I deduct the $1,000 in 2018, I save only $120. So I'm $30 better off paying it in 2017.

I am nowhere close to being affected by the $10,000 limitation on the combination of state income tax and property taxes that begins in 2018. For those that are, that would be a huge incentive to prepaying.

Note however, you canNOT prepay 2018 state income taxes in 2017 -- the TCJA expressly forbids that. Well, you can, but you can't claim it as a deduction on your 2017 taxes.

But the TCJA doesn't have a prohibition on pre-paying 2018 property taxes in 2017 and deducting it on the 2017 taxes.

All of the above advice applies only to people who itemize their deductions. From a taxes standpoint, it would be pointless for the 70% who don't itemize (and thus take the standard deduction) to prepay anything.

As a special category, some people might itemize in 2017 but not in 2018 because of the near-doubling of the standard deduction (who don't have enough itemized deductions to exceed the new higher standard deduction). Those people would also benefit from prepaying everything they can in 2017. Including like accelerating charitable giving -- give more in 2017 and correspondlingly less in 2018.

On Edit: BREAKING: IRS says 2018 property taxes are deductible only if assessed and paid in 2017
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=10030106

I've only glanced at it, but it looks like good info. It also shows the clause in the TCJA about disallowing deducting a 2017 prepayment of 2018 state income taxes. (There's no equivalent clause regarding prepayment of property taxes or sales taxes)

https://finance.yahoo.com/news/faq-can-prepay-taxes-2018-181936174.html

The same limit's will be there the next year and the one after that. Looks like many in the middle to upper middle class learned this was a Republican SHAFTING very early on.

(one is not allowed to prepay 2018 state INCOME taxes in 2017 and deduct it on 2017 federal taxes -- the TCJA has specific language about that -- 20XX state INCOME taxes may only be deducted in 20XX taxes).

for anyone at the $10k limit. I bet car dealerships are wondering how they can compensate, or if they can compensate.

Can I form a corporation with no purpose other than to pass through losses?

Our town office was very happy to get the money.

They get use of it a year early. We get to deduct it from this year’s income.