Prepaying multiple years of property tax in 2017 for AGI reduction

Since there is a 10k cap with the (shameful IMO) tax plan, starting in 2018 you are are limited to 10k deductions for all SALT and property taxes.

Many jurisdictions are allowing pre-payment for property taxes (the plan prohibits SALT prepayment for itemizing), though it remains to be see if the IRS will allow you to actually reduce your AGI for 2017 for the property taxes. I plan on walking down to my treasurers office next Wednesday and cutting a big effin check. The question I have, and haven’t seen asked anywhere else is do you think this will fly for multiple years? I’m in the process of grabbing some scratch together to cover 18-19, but was considering putting in 20 as well.

Has anyone seen anything about multiple years? The IRS is woefully understaffed, so I think the odds are likely one could get away with this. AFAIK it’s not illegal, primarily because the new law doesn’t say you can’t do this.


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It will not work. You are just going to be paying the AMT.

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Just saw a thing on the news about this – not sure if it went through, but apparently, they had thought about this (government, not IRS) and were blocking pre-payment. Supposedly it was going to either be added to the bill or a separate vote (which I can’t imagine would happen this late in the game…)

My accountant suggested sending in all the payments this year so that everything clears this year. I’m in the same boat - takes alone are outrageous and losing the deduction SUCKS. Hopefully there will be something else that can be done to help offset the cost, other than moving out of the state, because this really is horrible – and I’m by no means rich. Ask my boss.

Good luck everyone!

DIdn’t think of that, but I can probably figure out what amount puts me just below the threshold. I might undercut it by $900 just to lower the risk of an audit. Fortunately the county will refund the deposit if I ask.

I wonder how many people will pre-pay, take the deduction for 2017, get a refund and then just invest that and go back to using escrow to pay their property taxes. Completely illegal btw. But the IRS is so understaffed I doubt they will catch anyone doing this.

I’m pretty certain the law only blocks prepayment of state and local taxes, not property taxes.


Dunno… good luck!

In some jurisdictions, this could turn into a headache for you if the tax collector’s system doesn’t handle multiple years’ payments easily or at all. Where I used to live, this was the case. You might end up with the hassle of explaining your situation over and over to multiple tax collector people once or twice a year for a few years. Not saying it won’t be worth your time, but there it is.

[quote=“fasttimes, post:6, topic:2396, full:true”]
Since there is a 10k cap with the (shameful IMO) tax plan…[/quote]

BTW, more than 30% of the homes in NJ have property taxes above $10K. Just sayin’, and before anyone goes off about high taxation, they just have a different mix of taxes than other states. Some have very high sales taxes, even on food. But the GOP made their picks.


Check if your state even allows prepayment of next year (or future years) property tax payments. Washington State does not because the county auditor hasn’t made final assessments yet for 2018. In WA states’ case, it doesn’t allow you to prepay online and news articles I’ve read online say they will return any mailed checks sent for prepayment. If you are fortunate enough to be under AMT (if this matters) and your state or county does allow prepayment, I’d say go for it!

What is the amount of expected savings for y’all by prepaying the property tax?

If you itemize, it would be your tax rate times whatever you prepaid over the standard deduction. Could be a couple hundred to a few thousand in savings.

There would be 3 reasons to prepay if allowed to do so:

  1. The standard deduction doubles next year so many people who itemize now may not itemize next year.
  2. The property tax plus state tax allowed next year caps at $10k, which might be an issue for those with high property taxes or living in high sales tax states.
  3. Your tax rate may lower next year.
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This is what the law you’re referring to actually says. I’m not convinced the conference report which says you can’t get a deduction in 2017 for 2018 state and local income taxes is correct, and haven’t seen anything proving to me that the conference report correctly interprets the language of the statute.

(6) LIMITATION ON INDIVIDUAL DEDUCTIONS FOR TAXABLE YEARS 2018 THROUGH 2025.—In the case of an individual and a taxable year beginning after December 31, 2017, and before January 1, 2026—

(B) the aggregate amount of taxes taken into account under paragraphs (1), (2), and (3) of subsection (a) and paragraph (5) of this subsection for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return).

For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.

What happens if you prepay a number of years and then for whatever reason, you sell the house before you get to the end of your prepaid property taxes?

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[quote=“Full_Disclosure, post:13, topic:2396, full:true”]
I’m not convinced the conference report which says you can’t get a deduction in 2017 for 2018 state and local income taxes is correct, and haven’t seen anything proving to me that the conference report correctly interprets the language of the statute.[/quote]

Let’s keep in mind that after the original conference report got out, it spread like wildfire that one should deduct your prepaid state & local income taxes, and they rushed to go back and add the language to prevent it. Their intent is crystal clear, and that is what prevails, even when disputes in regards to a statute get to the SCOTUS.

If anyone wants to try deducting state & local income taxes, I would advise you to get the written opinion of a pro, at least a CPA or a tax attorney.

The statute is silent in regards to property taxes, so it’s just a matter of whether your state has a mechanism to accept your payments. If not, perhaps you can just overpay ? Dunno.

Obviously you could make it part of the contract they need to reimburse you, just as happens when payments arrive because of a drawn-out sale.

With respect to property tax, that is a function of county government in my state. I was pleased to find that the Dept of Revenue (in my county) anticipated this question and has it answered on their website. I can prepay my 2018 tax bill up to the amount of estimated tax (based on 2017 bill), and they will show it as a partial payment when I get the bill in July.

Interestingly enough, I see there is a line item for prepayment credit on my 2017 bill which came out months ago, so this isn’t something they are rushing to accommodate; it’s always been there.

The ability to deduct in 2017 is only educated speculation at this point, but on the other hand I see little significant down side in doing it.

I periodically prepaid property taxes based on my income that year and how many deductions I felt I needed to avoid going into the next tax bracket. For most people AMT is not going to matter, only for those making over $200k a year in AGI or so. In future tax years, because the county’s property tax system allows for partial payments, I’ll prepay property tax installments so that state income and county property taxes equal $10,000, and nothing more, since state income tax + county property tax usually only barely exceeds $10,000 for me.

I’ve been sleeping a bit on this subject, glad I caught this thread. I paid my 2016 taxes in 2017, so I’m going down with the intention of paying 2017 and prepaying 2018.

A news story on this strategy that I read somewhere yesterday said people were going down to the county office and standing in line to pay in person. It also quoted a county official warning that mailed in payments may not be processed until early January.

What difference does that make? Unless I’m mistaken, a cash basis taxpayer writing a check on December 31 and sticking it in your mailbox makes the effective date of the expense 2017, no matter when it was received and processed. No?