Prepaying property taxes with a mortgage escrow

Prepaying property taxes with a mortgage escrow
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#1

Has anyone started looking into prepaying your property taxes in 2017 to take advantage of the 2018 tax changes?

I’m looking into doing this for unsure of what happens to my mortgage who has been accruing and planning to pay my property traces on my behalf in 2018… Does anyone have experience? I would hope my mortgage company is smart enough to just refund me the amount.


#2

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#3

Not an option. Over the weekend the US Treasury issued guidance indicating one cannot claim prepaid 2018 SALT on 2017 returns. Still developing, but here’s an interesting report:


#4

And this:

Last week, according to media reports, state officials in New York received calls from residents asking to pay their 2018 state, local and property taxes before Jan. 1 in an effort to claim the higher amount of deductions before the Republican tax bill takes effect.

In response, the U.S. Treasury Department issued guidance over the weekend saying that any pre-payments for 2018 tax liabilities would not be deductible on federal tax bills.


#5

I’ve considered this regardless of the tax changes (to shift the payments between years plus easy small amount of manufactured spend).
To me it doesn’t seem worth the possible aggravation that might be needed to sort it out, although I’m sure I would most likely automatically get an escrow refund quickly if I paid my property tax Before the servicer grabbed the balance due from the taxing authority. It seems like it might screw up the servicer’s calculation of the next year’s escrow requirements too (if they use taxes They paid rather than getting the full tax assessment for the next year’s’ calculation) which may cause additional issues the future year, such as the payment changing mid-year.


#6

All these articles talk about income taxes, nit property taxes… Unless I can’t read!


#7

Where is the Treasury guidance? None of these articles actually link to the Treasury guidance. Also, Treasury isn’t permitted to create law just by issuing a memo - are they talking about proposed regulations? Would love to see this guidance if anyone can find it since I’m not particularly willing to accept a one-sentence conclusion of one or two professionals.


#8

I am planning to do this also. Pay the 2nd installment of Property Tax (which is due Apr 1) by Dec 31st. I think this rax is for the year 2017 but can be deducted in the year you pay it.
in CA u get a bill with 2 payment coupons 50% due Dec 1st and the other 50% due on Apr 1


#9

They don’t have to create law. Seems like an obvious step transaction if they want to consider it one? https://en.m.wikipedia.org/wiki/Step_transaction_doctrine


#10

Referring to the post I quoted (not about escrow money), I don’t see this as involving the step transaction doctrine, but definitely open to an argument that it could be, it’s just not readily apparent to me.

If it did, and Treasury says it does, depending on the type of guidance they’re issuing and what exactly they’re interpreting (statute, their own regulations, etc.) it may or may not have precedential effect. Treasury can’t simply say “it’s a step transaction” and therefore it is a step transaction.


#11

Once you pay the property tax, you should inform your mortgage co and request a refund of your escrow balance. They may not be smart enough to do it automatically. You should call them and find out how to do it. Mine requires a request letter with a “wet signature”, but they can accept it by email at an email address for the department that handles this.


#12

Confusing in the summary of the 1000-page tax bill, but it appears that only state and local INCOME taxes cannot be prepaid and deducted. That detail seems to imply that PROPERTY taxes can be prepaid and deducted.

That tax foundation article also says only applies to INCOME taxes.

Unfortunately, many taxing agencies will not allow excessive prepayments, but you may be able to do at least a year.


#13

That article also says only INCOME taxes are restricted, but leaves PROPERTY taxes as a prepayment option.


#14

I also had the question on pre paying while having an escrow.

My thought was that my county just wouldn’t send a bill to escrow, since I wouldn’t have a balance. My escrow would keep building, and then I’d finally get it adjusted and get a refund check when they do the next escrow analysis.


#15

I talked to my servicer (chase) and they said there are 2 options

  1. they would check the balance before payment due date so there is no double payment. there is an annual review of my escrow that occurs where they would notice they were over funded and at that point would adjust my mortgage payment or issue a refund

  2. I send them a receipt and they will review my escrow balance and issue a refund if needed.


#16

My thought is every county and every mortgage servicing company follows different processes, and the only way to be sure is to call and ask.

My bill is split in two – the first part is due in December, the second is due in April of the following year. But they send both pieces together in October, and there’s no way for me to pay before they send the bill.


#17

I’ve already checked with my county…I can make a payment online any time I want. They already have a preliminary invoice online, with an estimated bill (probably same as last year)…even though assessments aren’t final until March, and bill isn’t due until May '18 (and November '18).

Every mortgage servicer I’ve had completes an annual escrow analysis and either refunds overpayments, or bills for shortages (or adjusts your monthly payment).

I’m going to call my mortgage company (PenFed) tomorrow. My guess is they are getting a lot of calls on this…I know the local counties are.


#18

I ran AMT calculator on 2016 taxes by doubling the property taxes and it only reduced my tax liability by few hundred. Most of the benefit was eaten by AMT.