A Last-Minute IRS Notice Could Hurt Filers Who Prepay Their 2018 Property Taxes

A last-minute announcement by the IRS could hurt many taxpayers rushing to prepay their 2018 property taxes before the end of the year.

Late Wednesday, the IRS announced that filers could claim their 2018 property tax payments on their 2017 federal taxes only if the taxes had been assessed in 2017.

The news, with just two business days left before the end of the year, spreads even more confusion among millions of taxpayers across the country who are hoping to take one last big property tax deduction before the GOP tax plan takes effect on Jan. 1.

With filers across the country asking “Should I prepay my 2018 property taxes?” the federal government’s announcement Wednesday has whipped state and local tax collectors into a frenzy as they try to determine if early payments for 2018 property taxes will let their local citizens take an extra-large deduction on their federal taxes in 2017.

And the news is not good for everyone.

As a part of the Tax Cuts and Jobs Act, which President Trump signed into law last week, a new $10,000 limit on deductions for state and local taxes will take effect in 2018. That $10,000 limit combines both local property and income taxes, and could mean taxpayers in states like New York, Illinois and California who pay higher local taxes could take a big financial hit.

It was widely believed that one way ease the pain — for next year, at least — would be for filers to prepay their 2018 property taxes before 2017 ends. But the IRS advisory clarified the federal rules Wednesday afternoon. The new guidance states that prepayments are only tax-deductible “under certain circumstances”:

The final word by the federal government has created confusion among taxpayers and collectors alike. Just days prior, New York Gov. Andrew Cuomo issued an emergency executive order authorizing the collection of early tax payments, a proclamation rendered moot if the IRS won’t ultimately honor the deductions on 2017 federal tax returns.

Meanwhile, Long Island property owners have nothing to fear, reports Newsday, because Nassau and Suffolk counties — like many other areas across the country — have already sent out bills based on the assessed (not estimated) values.

In contrast, Westchester County officials said that they would not be able to crunch the numbers for their property owners in time, according to the Wall Street Journal.

On the west coast, some local governments are shooing away taxpayers by not even allowing pre-payments at this time. Los Angeles County is not allowing pre-payment of 2018-2019 tax bills because the tax bills will not be generated until September 2018, at the earliest, the county assessor’s office said in a statement.

Likewise, San Francisco county is not allowing pre-payment, and did not provide a date for when they would do so.