Block on Trump's Asylum Ban Upheld by Supreme Court
The tax overhaul recently passed by Congress has a lot of changes in store for 2018, but one in particular may have a big effect on people's 2017 tax returns. The new tax bill will cap what federal taxpayers are allowed to deduct for state and local taxes at $10,000, sending some forward-thinking homeowners to their municipal tax offices in an attempt to prepay their 2018 property taxes in 2017 in order to maximize their deduction.
But will it work?
As Forbes reported, several states tried to accommodate prepaying residents trying to slide in under the tax deadline. But the feds said no so fast. The Internal Revenue Service issued a statement last week, trying to clarify matters [emphasis added]:
In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 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.
Essentially, if your property taxes haven't been assessed yet, prepaying them won't help you avoid the deduction cap. The IRS also provided examples of when prepayment would and wouldn't be deductible on 2017 taxes. Additionally, prepayment may not be available in your jurisdiction.
The question then becomes: What if you already prepaid your property taxes, or what if you want to prepay anyway? As David Harrison of the Wall Street Journal told NPR, no one is really sure:
"And so the question is, you know, once we figure out what exactly the IRS means, once this has been sorted out - some of these people have already paid. And they paid before the IRS issued its guidance, so are they all of a sudden going to get audited? Are they all in trouble? Or suppose - imagine you paid Tuesday before the guidance. Your neighbor wants to pay today after the guidance. So you're in somehow different legal situations."
Harrison's advice? Call your tax advisor. If you don't have one or have more questions, contact a local tax attorney.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
Sign into your Legal Forms and Services account to manage your estate planning documents.Sign In
Create an account allows to take advantage of these benefits: