Maybe their payments are sufficiently large to warrant the wait time? If there’s no reason to, why take the risk of an IRS challenge or the risk of the check not actually being delivered/being refused by the county or your bank?
In tax, the plain language of the statute almost always prevails, even when the court determines it wasn’t likely the intent of the drafters. The intent is (almost) never crystal clear, and the first thing the courts will look at in determining what the intent is, is the plain language of the statute.
The limitation has a specific purpose to it the way its written. This isn’t a situation in which the statute otherwise makes no sense.
I’m not recommending anyone take any particular position. I agree that if one is planning on taking a tax position they should consult a professional. Just pointing out that what the statute says isn’t what people are saying it says.
Point taken. If, like one example in the story, one is paying a $30,000 property tax bill, it would be worth it to be damn sure.
But if one is dealing with a much smaller amount, or is only reading about the strategy of prepaying property tax (where the taxing authority allows it), and it was 5:01 PM on 12/29/17, then I’d go ahead and stick it in the mailbox. Unless I’m mistaken, constructive delivery occurs at that moment when we are talking about making interest payments, charitable donations, date property tax was paid, etc.
Yes, in that case, the risk is simply that you lose some interest float on that money for no reason (assuming you aren’t itemizing next year). It’s not really “constructive delivery” - I believe the rationale rests on the fact that the USPS is an agent for the recipient, and thus your delivery to the USPS is delivery to the recipient. At a minimum, I’d want to see the postal worker physically stamp that mail-piece. If you put it in your mailbox on Dec 29 and the postal worker doesn’t pick it up on the 30th you could be SOL.
No, it is exactly “constructive delivery.” This occurs when the check is irrevocably mailed even though physical delivery has not occurred. I’ll admit to gray area around whether sticking it in one’s own mailbox is sufficient, or if it is put in a USPS mailbox. But particularly in the latter scenario, when it is postmarked, delivered, or processed by the tax authority is not relevant.
I don’t think I’m alone in having many times placed a mortgage interest payment, charitable donation, etc. in the mailbox on December 31 of a tax year and successfully taken that deduction in that tax year. (I’ll stipulate that doesn’t make it legitimate, only that many people do that and think they have followed the law).
But let’s both you and I admit that we are both stating the way we think it works, so in the absence of citing CFR or tax code specific to time of making property tax payments, including what “mailing” means, it’s not useful to debate it.
It’s not though, “constructive delivery” is a specific legal term. There’s no evidence that “constructive delivery” of a deductible payment is deductible in the year it is “constructively” delivered. The IRS has said that there is no “constructive payment” corollary to the “constructive receipt” doctrine. They’re applying agency principles, not principles of constructive delivery.
I agree that payment is generally considered made upon “mailing.” My point regarding the postmark is a practical one, not about the theoretical question of what constitutes “mailing.” If the letter isn’t postmarked and you don’t have some type of receipt, how do you prove it was mailed when you say it was?
Not sure what you mean by “successfully” but unless you’ve been audited and the IRS didn’t modify the deduction, I’m not sure what point this proves or even provides evidence for.
It’s not about what we think. First, I agree that the date of mailing constitutes the date of payment for cash basis taxpayers. Similarly, I agree that the definition of “mailing” in this context is likely not settled - so no need to agree to disagree there.
Second, my post was about the practical considerations one needs to take into account, and it’s not how I think it works, it’s how I know audits progress. If an auditor sees that check with a check date toward the end of December; the statement from the county saying the check was processed in January; and/or your bank statement showing the withdrawal of funds in January, they will almost certainly ask for proof that it was paid in December. Aside from any technical discussion about whether mailing constitutes payment (which the auditor would likely agree with given Rev. Rul.'s and court cases on point), or what the definition of “mailing” is, I would not want to be sitting there with my only proof being the date I wrote on a check/a contemporaneous statement about when/where it was deposited into the mail.
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[quote=“Full_Disclosure, post:22, topic:2396, full:true”]
In tax, the plain language of the statute almost always prevails, even when the court determines it wasn’t likely the intent of the drafters. The intent is (almost) never crystal clear, and the first thing the courts will look at in determining what the intent is, is the plain language of the statute.[/quote]
The fact that the conference report was done, and then they went back later to add language to specifically prevent the deduction of 2018 state and local income taxes in 2017, is about as crystal clear as you can get.
Remember when the ACA was in front of the SCOTUS, Roberts said from the bench that they were being asked to interpret the intent of one line in one paragraph on one page one way, when the intent everywhere else in the statute was the other way.
OK, so we agree that the date of payment is the date it was “mailed”.
If your position is, as a practical matter, it is a much more defensible deduction if you have a receipt from the county dated prior to year-end, or a certified mail receipt, etc., then yes, I’m all with you there.
But you’ll agree with me, won’t you, that the implication (not yours, but in the article I was reading) that the property tax payment had to be processed by year end to be deductible this year is false.
Again, if I was someone reading this thread December 29 at 5 PM and suddenly realized how worthwhile it would be to make a 2018 pre-payment in 2017 (if allowed by the taxing authority), then I would write a check and stick it in the USPS mailbox, and not think another thing about it. Would it have been better to have done it earlier? Sure. Would I be worried that doing so would subject me to audit, or having the deduction disallowed? No. Unless there is some circumstantial evidence that the payment wasn’t unconditionally made before year end (e.g. the check was dated 1/2/18), then I’d call that risk extremely low.
Check with your county first. This was posted on our county’s property tax website:
2018 property taxes cannot be paid in 2017 because state law does not allow county treasurers to accept tax payments until the tax roll has been completed. The King County Department of Assessments will not complete certification of the new tax roll until January 2018.
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This was a constitutional question. The Court explicitly distinguished between interpreting statutes where constitutionality was in question and other statutes. Also, this wasn’t a tax statute, so not sure it’s relevant to my statement.
It stands though, that unambiguous statutes, in tax, are almost always interpreted based on the plain language of the statute (without resorting to legislative history).
Yes, in most circumstances. (and not considering wages/possibly similar payments)
Yes, I agree, absent some state or local law which would require it to be processed by year end.
Right, well if your property tax payments are audited then they will ask for proof you made payment in that year. I’m all open to other forms of proof you can think of - I’m not being sarcastic here, if there are other ways to prove date of mailing it could be extremely helpful to people.
This may be one of the circumstances I reference above in which it may not be deductible even if mailed by the 31st.
Right and I already agreed with you there as the only thing you’d be losing is the possible interest float. I’m not saying you aren’t allowed to deduct it if you don’t have a postmark, all I’m saying I’d ideally like to have proof of time of mailing (which we both have already said is ideal) - and I pointed out that it’s something that would be difficult to substantiate on audit.
I went to my local treasurer office today. I paid my 2017 taxes and was ready to do 2018. The lady at the counter said they won’t do it and couldn’t explain why other than she was told it can’t be done. I’m really bummed as I would’ve saved some $$$$$. I need to see what else I can do. Good luck everyone!
From that link: 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.
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Balls.
Oh well, maybe my county will give out gold stars to people who paid their tax a full 13 months before the due date.
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Any one in Dallas/Terrant/Collin/Denton county, prepaid their taxes? Do we get tax advantage by prepaying 2018 property taxes. I already paid 2017 tax and Dec mortgage bill. Going forward, is it good idea to pay 2 property taxes in one year and switch between deductions?
As always, it depends, based on your mortgage interest, investment interest, and charitable contributions (which are all that are left for most people). In my case, my annual property tax plus state income tax come to around $11,000 so next year I will prepay for Fall 2018 and Spring 2019 in 2018 and underwithhold my state income tax, making the contribution to the DAF I was thinking about this year but decided otherwise not to. In 2019 I will deduct the Fall 2019 property tax payment and max out my state income tax deduction. In 2020, assuming current law stands, I may give up, pay off the mortgage and my margin loans, and take the standard deduction in perpetuity (since standard deduction will rise with inflation while SALT will not).
One of the national evening news broadcasts showed footage of a long line of people at a local tax office, when a representative came out to announce that guidance had just come out from the IRS that if the 2018 taxes had not yet been assessed, they could not be deducted in 2017, even if you prepaid them, and that county had not yet done the assessment.
They spoke to one guy on camera who they said was in law enforcement, who said this was going to cost him more than three grand in additional taxes every year going forward. He was NOT a happy camper.
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[quote=“JoeFriday, post:38, topic:2396”]`
They spoke to one guy on camera who they said was in law enforcement, who said this was going to cost him more than three grand in additional taxes every year going forward. He was NOT a happy camper.
[/quote]
Without knowing that person’s overall tax situation, it wouldn’t be fair to call that hyperbole. However, if he was only looking at the excess over the limit of SALT/sales/property deductability and multiplying that by his 2017 marginal rate, then that’s not a useful assertion. If he does a calculation that includes tax rate and bracket changes, changes in phase-outs, increase in standard deduction, higher threshold for AMT, etc. and still finds the impact is $3,000, only then will his claim be accurate.
Kind of late now, but had a thought. You might not want to prepay property taxes if a) the IRS claims this isn’t sufficient to take the deduction in 2017 (as they just have), and b) there’s a chance your state might create a work-around that allows you to pay your property tax in a federally deductible way.
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