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IRS Says Pre-Paying Property Taxes May Not Work

by Countable | 12.28.17

What’s the story?

Under the new tax law that takes effect January 1 deductions on state and local income and property taxes are capped. Municipalities and taxpayers in high-tax states like New York, New Jersey and California have been scrambling so that 2018 property taxes can get pre-paid before the new law goes into effect.

But now, the New York Times reports, the IRS says that not all prepayments will be eligible for deduction in 2017.

The IRS posted an advisory notice on Wednesday, stating that in order to qualify for the deduction property taxes must be both paid and "assessed" in 2017.

However, the notice is not a legal ruling, nor does it clearly define what it means for a tax to be "assessed".

Some localities have already sent out tax assessments for part of 2018, even if the payments are not due until next year. Those prepayments are probably eligible. But if assessments are based on prior years or haven’t even been done, prepayments may not be deductible.

Taxpayers can roll the dice, hoping the notice will be legally challenged and the courts will rule in their favor, but if you pay enough in property taxes for prepayment to be a significant deduction, then that’s an expensive gamble.

What do you think?

Are you prepaying property taxes to take the deduction before the new law goes into effect? Do you think the IRS should allow the deduction, or do you think folks are gaming the system?

Tell us in the comments what you think, then use the Take Action button to tell your reps!

— Asha Sanaker

(Photo Credit: Chris Potter via Flickr / Creative Commons)

Countable

Written by Countable

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(16)
  • Mancos
    12/28/2017
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    Help me understand why paying 2017 property taxes in 2017 doesn’t qualify based on a new tax “reform” bill that doesn’t take effect until 2018. Sounds like a class action lawsuit to me. Does the Federal government need to depend on revenue from the Middle Class but affords to give billion dollar tax breaks to the 1% and big business? This just doesn’t make any sense.

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  • Azrael
    12/28/2017
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    Not giving the government one cent in advance for taxes We’ll deal with this at the polls in November

    Like (5)
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  • Dara
    12/29/2017
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    Another scam by trump and the worthless congress. More swamp! People in this country need to wake up and see the scam at some point. Elections have consequences people. As long as the middle class buys into this sham they will never move forward.The politicians in Washington have been feeding this line of bull to the electorate for over 40 years and they have drank the kool-aid! Look at their actions, don’t listen to the rhetoric, and stop voting for the same old tired candidates. Think people think.

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  • Linda
    12/29/2017
    ···

    I am one of the middle-middle class (widowed senior citizen with a 5-figure income) who will be hurt to the tune of about $2,000 by the new tax bill. I have no ability to make up this significant loss through salary increases. Instead, I have to pay my retirement money to Donald Trump and his family. So I tried to get a one-year benefit to offset a small portion of the tax burden the GOP has imposed on me and others like me. Instead, I’ve been told the IRS will not allow me to deduct my prepaid 2018 real estate tax because I haven’t yet been billed for it. Do they think I will get a freebie on my taxes next year? This is just another way they have of sticking it to the little guy — or little old lady in this case. I am asking my Congressman and my Senators to pledge to reverse this awful tax bill as soon as they are in the majority — I pray that is in the next year!

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  • Tilton
    12/28/2017
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    Let’s think about why such a rush to pay ahead on taxes was a panacea pushed by congress GOP-ers. Now the IRS suggests that some issues may arise for some who do pay ahead. Wasn’t it possible to determine if paying ahead was a potential problem before the bill was passed? Pushing a bill such as this tax reform without time for an effective evaluation really seems to distract away from the need for good governance. Yes, I think this is very similar the poor review of the ACA by congress when members complained it was too long to read. Congress needs to better represent itself to the America people for a variety of reasons. It needs seek better solutions by showing they are mindful to the electorate. Congress...Do your job better and do your job now!

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  • Mark
    12/28/2017
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    Of course, it makes no sense at all. That’s why it’s being enacted 🤮

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  • RadicalModerate
    12/29/2017
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    Paying your taxes is contributing materially, to a terror organization. Let the corporations buy all the guns and bombs to pursue there horrible agenda.

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  • Christine
    12/28/2017
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    Double taxing is illegal under the U. S. Constitution. Rather than go the arduous litigation route, The penalized BLUE states where djt got pummeled will look into changing their tax codes to PROTECT the people. Bravo!

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  • Milan
    01/02/2018
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    I think the GOP are scamming the system - shame on them for considering their own pockets and screwing the American public

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  • Walter
    12/28/2017
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    This is a loophole protecting high value real estate owners in states that allow deductions from federal returns for state taxes up to $10,000.00. Solution is easy: they should pay their fair share to the federal government and elect state officials that will lower their ridiculously high taxes.

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  • BeStrong
    12/29/2017
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    Of course they say it won’t work. There is no way that counties can respond within the mere days left in 2017 to perform accredited home valuations. Surprise! It’s your Federal Government working for you. Chant..3 years 23 days 3 years 23 days... and #Vote2018 #Vote2020

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  • Carlos
    12/30/2017
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    Lol!

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  • Marissa
    01/01/2018
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    Pay your fair share of taxes. That’s what other people keep harping about. Now since it has affected people from Blue states with high personal property and state income taxes, all of a sudden it’s an injustice. If you don’t want to pay taxes then don’t make money. Don’t own anything so you don’t pay any property tax. Set up a not for profit and volunteer your work.

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  • Darby
    01/01/2018
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    I’m okay with the corporate tax cuts, but I am not okay with the individual tax cuts to the 1% of citizens who are taking home a paycheck of $500,000 or more. The CEOs of the corporation should have to pay more in taxes but the corporation the own or operation should have the tax cuts. Example: if the corporation is making $1,000,000 take $210,000 in taxes that’s fine. Then if the CEO is making $400,000 or more take 33% of that for a total of individual tax of $142,000. That’s what I call fair.

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  • Dave
    12/29/2017
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    All those state that have state income tax and property tax are hosed, see how the republican care and get even! The red state are next! They got to come up with the money for the welfare rich some how.

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  • Stallion
    12/29/2017
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    I”ll bet it works for Trump and the other rich far cats.

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