There has been a wave of news about homeowners rushing to prepay their 2018 property taxes before the Republican tax law takes effect on Jan. 1, 2018. Taxpayers are looking for a way to take advantage of the 2017 tax code before the new tax bill, which caps the amount of state and local taxes that taxpayers can deduct from their federal tax bill at $10,000, takes hold. This cap comes as a hit for owners of homes with property taxes that exceed $10,000 a year. It’s particularly relevant for homeowners in states such as New York and New Jersey, which generally have high property taxes.
While there has been some debate about whether prepaying taxes would actually be beneficial for your 2017 tax return, today, the IRS issued a statement that confirmed it could be. The IRS explained that homeowners could prepay their 2018 property taxes and deduct them in 2017, ahead of the new legislation, under certain circumstances. For starters, the taxes must have been assessed prior to 2018. In other words, anticipated taxes that have not yet been assessed will not be deductible. And of course, taxpayers must have made those assessed 2018 property tax payments in 2017 in order to deduct them in 2017.
“A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017,” the IRS said in a statement.
The IRS also noted in the statement that charitable donations could help cut tax bills. For more information about which organizations qualify and how to collect proof of monetary donations, check here.