While many U.S. taxpayers can deduct their 2018 state and local property taxes on their 2017 returns if they pay those taxes before the end of the year, Grayson County residents won’t be among those with that option.
Grayson County Tax Accessor Collector Bruce Stidham said his office cannot accept property taxes for 2018 until January. Stidham said if taxpayers look on the IRS website, they will see that they can’t deduct their 2018 taxes even if they prepay them because they are not assessed until 2018.
“The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes,” the IRS website states. “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.”
Homeowners in states with the highest property taxes have been asking local officials how to prepay the bills in an effort to take advantage of a tax break that will be limited in the new year. Those homeowners are being encouraged by state officials, notably in New York and New Jersey, who are looking to facilitate prepayments.
Bloomberg reported residents in New York City, where the property tax fiscal year runs from July 1 through June 30, can pay their property taxes from 2017 before the due dates. However, the city’s Department of Finance is instructing people to consult their tax advisers before making such payments.
The tax-overhaul bill that President Donald Trump signed into law last week will limit the deduction that individuals can take for the state and local taxes. In the new year, that deduction will be capped at $10,000. That limit applies to any combination of property taxes and income or sales taxes.
Trump signed the bill a little over seven weeks following the introduction of the first bill in the House of Representatives.
Tax professionals said not every taxpayer will benefit from paying their property taxes early. Those who pay the alternative minimum tax would not get the benefit.