The Internal Revenue Service’s 27th December 2017 regulation upended many taxpayer’s plans of paying their 2018 property taxes early before the new tax law takes effect in January 2018 to claim a federal deduction.
If you are also thinking of prepaying or already prepaid, here are few things you should know:
1. Check Your Tax-Assessment Dates
Before paying tax, you must be sure that your property has assessed by the local tax office for 2018. Many jurisdictions send a bill to the taxpayers several times throughout the year. If you have received a bill due in 2018, it might make sense to pay it now if you want to claim federal deletion. For instance, Iowa property taxes paid twice a year and residents of Iowa already received a bill due in early 2018, said Nicole Kaeding, the Tax Foundation economist. “Those individuals could go ahead and pay by the end of the year and it would be safe to deduct,” she said. In jurisdictions that have assessed properties but not yet sent bills, there may be a gray area. The District of Columbia, which has completed the assessment but still not billed to taxpayers, says they may qualify for the federal deduction by paying the tax before the end of this year. But it is not cleared yet the IRS will agree.
2. Beware the AMT
Make sure that you will not be eligible to pay alternative minimum tax by prepaying your property taxes. The AMT tax system is different, the system designed to prevent people using legal tax breaks to avoid paying all taxes that are mainly applicable to higher income households. If your federal tax deductions rising rapidly due to prepaying your 2018 property taxes, it would be the cause you might reach the threshold that you pay the AMT. Likewise, if you will already be paying the AMT, property taxes prepaying might be of the same opinion tiny or no lead.
3. Confirm Your State and Local Tax Bill Is High Enough
Try to define if your stubborn confess and local tax credit adjacent to the year will exceed the $10,000 cap which was added to the performance. If you have systematically paid in state and local taxes less than $10,000, you will probably yet be skillful to deduce the full amount you spend into your meet the expense of entry and local governments. Concerning individual tax issue, you should note that you may choose for 2018 to allocate the satisfying sufficient taking away, which the performance raised to $12,000 for individuals, $24,000 for married couples filing jointly and $18,000 for heads of household.
4. Speak With Your Mortgage Provider
Mortgage provider set up an escrow account for their client and many homeowners pay their property taxes through the account. The account used for paying the monthly payment to the mortgage company, which then takes care of paying the necessary taxes. If you are going through that situation and you want to prepay your property taxes, you must talk with your mortgage first to avoid paying the tax twice.
5. Talk to a Professional
Finally, most important, it is advisable to talk with your tax adviser. They will assess your current status to give you the best advice as the circumstances vary by household and will assist you to get the best solution.