Homeowners wondering whether they should pay their 2018 property taxes in advance of the changing tax law are running out of time.
While the deadline is Dec. 31, to make this work, a number of things have to align in your favor: you have at least part of your 2018 tax bill in hand, you're not subject to the alternative minimum tax (AMT) and your local municipality is open and set up to take the payments. (Some offices may be closing early for the holiday weekend.)
Because of guidance issued by the Internal Revenue Service, the decision may be moot. In the midst of taxpayers across the country lining up at their local tax offices to pay those bills early, the federal agency threw a last-minute wrench into taxpayer plans by limiting what payments can count against their 2017 tax returns.
"A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017," according to the IRS announcement.
Basically, this means:
- If you have a property tax bill in hand — which means the tax has been assessed — you should be good to go. Even if it isn't due until next year, you can prepay. The amount can be taken as a deduction in 2017 if you itemize your deductions on your tax return (as opposed to taking the standard deduction). About 49 million taxpayers, or 28 percent, currently itemize, according to the Urban-Brookings Tax Policy Center.
- If your local taxing authority says it will accept prepayments but the tax has not yet been assessed — in which case your payment would be an estimated amount — the payment likely is not deductible on your 2017 tax returns.
Either state or local law determines when a property tax is assessed, which generally means the time at which the taxpayer becomes liable for the tax, according to the IRS.
If you have not received a bill for property taxes due in 2018, there's a good chance they have not yet been assessed. However, the only way to know for sure is to contact your local city or county taxing authority.