W. Edward Newton Jr., CPA, CFP
13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 |
Prepaid Real Property Taxes May Be Deductible in 2017
if Assessed & Paid in 2017
Dec. 27, 2017 - WASHINGTON - The Internal Revenue
Service advised tax professionals and taxpayers today that
pre-paying 2018 state and local real property taxes in 2017
may be tax deductible under certain circumstances.
The IRS has received a number of questions from the tax
community concerning the deductibility of prepaid real
property taxes. 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.
The following examples illustrate these points.
Example 1: Assume County A assesses property tax on
July 1, 2017 for the period July 1, 2017 – June 30, 2018. On
July 31, 2017, County A sends notices to residents
notifying them of the assessment and billing the property tax
in two installments with the first installment due Sept. 30,
2017 and the second installment due Jan. 31, 2018. Assuming
taxpayer has paid the first installment in 2017, the taxpayer
may choose to pay the second installment on Dec. 31, 2017,
and may claim a deduction for this prepayment on the
taxpayer’s 2017 return.
Example 2: County B also assesses and bills its
residents for property taxes on July 1, 2017, for the period
July 1, 2017 – June 30, 2018. County B intends to make the
usual assessment in July 2018 for the period July 1,
2018 – June 30, 2019. However, because county residents wish
to prepay their 2018-2019 property taxes in 2017, County B has
revised its computer systems to accept prepayment of property
taxes for the 2018-2019 property tax year. Taxpayers who
prepay their 2018-2019 property taxes in 2017 will not
be allowed to deduct the prepayment on their federal tax
returns because the county will not assess the property tax
for the 2018-2019 tax year until July 1, 2018.
The IRS reminds taxpayers that a number of provisions remain
available this week that could affect 2017 tax bills. Time
remains to make charitable donations. The deadline to make
contributions for individual retirement accounts - which can
be used by some taxpayers on 2017 tax returns - is the April
2018 tax deadline.
As we move into 2018 we will have more information on these
and other provisions to help taxpayers prepare for the
upcoming filing season.
Feel free to give us a call if you have a question about this
particular topic or issue or if you
need help or want to
get started on tax planning for 2018! If you have comments on the information in these
articles, as usual feel free to call our offices.
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Certified Public Accountant