The tax reform package just signed into law aims to spur economic and job growth. During the waning hours of 2017, it looks like it might be doing just that, at least as far as tax accountants are concerned.
Due to changes in tax rates and deductions—all broken down in this helpful Curbed explainer—many Americans are rushing to file early and prepay property taxes for 2018, in the hopes of taking advantage of expiring deductions and changing tax rules before the new law goes into effect on January 1. In Fairfax, Virginia, hundreds of residents lined up one morning earlier this week to prepay, and New York Governor Andrew Cuomo signed an executive order to help residents prepay.
The mad rush keeping accountants busy stems from back-and-forth between local jurisdictions and the IRS. Early this week, many local governments, especially in expensive, high-tax coastal markets such as New York, New Jersey, and Washington, D.C., told residents they could make and possibly deduct from prepayments.
But, just as soon as taxpayers began scrambling to file early, on Wednesday, the IRS said taxpayers could only claim deductions on taxes assessed during the 2017 calendar year.
That’s created uncertainty, with some local governments explaining to residents who already rushed to file early that prepayments likely won’t qualify for federal tax deductions. To get a sense of the confusion, check out the Washington Post’s list on responses from local officials in D.C. and surrounding areas of Virginia.
Here are some other suggested guidance from personal finance experts about the situation (of course, any and all tax questions should be answered by a professional).
- If property tax has been assessed but is not due until 2018, you can deduct the amount for this year as long as it's paid by Dec. 31. Without a bill for 2018, it’s not officially deductible.
- Ask yourself, based on your particular tax situation, if you will you itemize next year, or claim the nearly doubled standard deduction, since the answer will determine the impact of prepaying.
- Check with your local authorities: widely varying timetables for assessments and tax due dates have created confusion across the country.
- Those subject to the alternative minimum tax likely will not find prepaying beneficial.