IRS Issues News Release on Prepayment of 2018 Real Estate Taxes Due to TCJA
With the upcoming limitation to $10,000 annually for any deduction for state and local taxes on Schedule A, questions arose about being able to prepay taxes before the end of 2017 to obtain the unlimited deduction rather than face the $10,000 cap beginning in 2018. Congress shut down any thought of prepaying 2018 income taxes, treating any payment of 2018 taxes made in 2017 as being paid in 2018 (IRC §164(b)(6) after revision by the Tax Cuts and Jobs Act).
With prepaying income tax shut down, taxpayers began to think about prepaying property taxes, with a number of localities providing methods to advance pay taxes for 2018. But if a tax has not yet been assessed or billed, can that tax be deemed “paid” under IRC §164(a)?
In response to these developments, the IRS issued News Release IR-2017-210, IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017. The news release provides information on the types of payments made before the end of 2017 that can be deducted on the 2017 return.
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