Prepaying 2018 Property Taxes – They May Not Be Deductible

December 28, 2017

Due to the new tax law many taxpayers have been prepaying their 2018 property taxes in an attempt to take advantage of getting that deduction in 2017. The new law will limit state and local tax deductions to $10,000 in 2018. There is no such limit in 2017.

Yesterday, the Internal Revenue Service (IRS) issued a statement that will potentially disallow the deduction for prepayment of property taxes for many. In the statement the IRS states that such a deduction will only be allowed if both the prepayment and the assessment occur before December 31, 2017. Prepayments may not be deductible based on the anticipated property taxes that will not be assessed until after December 31, 2017.

Dates of assessments vary widely between states and counties and taxpayers are advised to check their localities before considering prepayment of their property taxes. Additionally, the IRS statement includes examples of when a prepayment is and is not deductible. Read the full statement.

It may be beneficial to prepay your 2018 property taxes in 2017 even if the deduction is ultimately disallowed since the IRS may subsequently change its position and especially if you would receive no benefit in 2018. Before prepaying please be aware that prepaying may not result in a 2017 tax benefit if you are subject to the alternative minimum tax in 2017.

If you have any questions about how tax reform may impact you, please contact an Aronson tax advisor at 301.231.6200.