Anyone else prepaying property taxes so you can still deduct them this year?

[havaneselover]

Property tax deduction up to a 10K cap. Mortgage interest deduction is remaining if you have an mortgage up to $750,000. Or if you already have a mortgage you're grandfathered in. HELOC interest not longer is deductible.



Thanks for the link. I swear I read it was an either/or thing but can't find it now...also the bill has kept changing, so maybe that changed too.

All these itemized deductions will only do any good if the sum exceeds your new standard deduction. Since personal exemptions were erased, you don't get that additional buffer.

Yep! It's all moot to me. No way I'm getting over $18,000 in deductions.

 

[mjkacmom]

Trust me, I get it. My brothers are in CT and NJ (each with three kids--they look "rich" on paper but live paycheck to paycheck). I'm not fond of the government picking winners and losers, but they seem to like doing so

In NJ, 5 kids, 1 income, 2 in college, $12,000 in property taxes for our 1800 square foot home.

 

[a742246]

In NJ, 5 kids, 1 income, 2 in college, $12,000 in property taxes for our 1800 square foot home.

and now house values may drop!

 

[havaneselover]

Our accountant said because we are subject to alternative min tax this year, it wouldn’t help. Otherwise I would have prepaid real estate and state income tax.

Prepaying state and local income tax is not allowed under this bill if that makes you feel any better.

 

[havaneselover]

WSJ has a lot of analysis of this today. One article shows a married couple with two kids making $300K in DC will see their taxes go down by $10,000 (analysis by Wharton School) so not all upper middle class families are seeing taxes rise. Of the six scenarios shown, the only one seeing a tax increase was a single person in NYC making $300K ($150 increase). I also think not everyone fully understands this and thinks their taxes will go up but they may not. That's why playing with the calculator might help.

I do think the effect on real estate values is much more concerning. I know parts of CT/NY/NJ/IL are forecast to see 6-10% drops in values.

 

[platamama]

Prepaying state and local income tax is not allowed under this bill if that makes you feel any better.

But I think you can make quarterly estimated tax payments in 2017 for state income taxes, i.e. to be applied to your 2017 state income taxes due. The regular due date for the quarterly estimated tax payment is Jan. 16, but you can make it in 2017, and still deduct it this year (if you have freelance income or non-salaried income).

 

[MomToOne]

Prepaying state and local income tax is not allowed under this bill if that makes you feel any better.

If you are like my area, the second installment of my 2017 property taxes is actually not due until March 2018. This is what everyone is saying you might want to pay before the end of the year, if you can. It is not "prepayment" of the 2018 taxes (which is not probably not allowed - but see below). If you itemize in 2017 but won't be in 2018, then you can deduct this early payment in 2017 and get the tax reduction that you won't get for it next year.

I want to do this, but I have an escrow account on my Chase mortgage. I'm giving them a few days to sort things out before calling to see if they can skip making the March tax payment if I request it. I'm good to just pay it myself early, then they could refund the amount to me at my next escrow evaluation in April. We'll see.

For similar reasons, you may want to make your January mortgage payment in the last few days of December, instead of in January.

I did see one article that said the bill may only really exclude prepayment of income taxes, and either doesn't or can't exclude the prepayment of property taxes. But I didn't dig at it and don't know if they were off their rockers or not. They definitely seemed to be swimming against the current on that one compared to everyone else.

 

[Hikergirl]

I'm in NY and at first thought we we were going to end up paying more in 2018 because we always itemize.
However due to the new tax brackets, now getting the child credit, and repeal of AMT for us we will end up saving using the standard deduction.
I feel for those families in my state (and others) who are going to be hit hard by capping income/property tax.

 

[MomToOne]

WSJ has a lot of analysis of this today. One article shows a married couple with two kids making $300K in DC will see their taxes go down by $10,000 (analysis by Wharton School) so not all upper middle class families are seeing taxes rise. Of the six scenarios shown, the only one seeing a tax increase was a single person in NYC making $300K ($150 increase). I also think not everyone fully understands this and thinks their taxes will go up but they may not. That's why playing with the calculator might help.

I do think the effect on real estate values is much more concerning. I know parts of CT/NY/NJ/IL are forecast to see 6-10% drops in values.

So far I haven't seen any calculator that correctly predicted the impact on my taxes. I've actually read the bill, and setup my own spreadsheet with the changes that apply to my situation to see the impact. I encourage everyone to do the same (although most of the info you need is now out there in more consumable formats, you don't need to read the bill LOL). The calculators have been off wildly, and my situation does not include anything unusual. It's just the number of different permutations and combinations of what deductions and such people take is so different, that these easy hit calculators and the few examples news articles give really aren't enough to know how you will or won't be impacted.

 

[havaneselover]

If you are like my area, the second installment of my 2017 property taxes is actually not due until March 2018. This is what everyone is saying you might want to pay before the end of the year, if you can. It is not "prepayment" of the 2018 taxes (which is not probably not allowed - but see below). If you itemize in 2017 but won't be in 2018, then you can deduct this early payment in 2017 and get the tax reduction that you won't get for it next year.

I want to do this, but I have an escrow account on my Chase mortgage. I'm giving them a few days to sort things out before calling to see if they can skip making the March tax payment if I request it. I'm good to just pay it myself early, then they could refund the amount to me at my next escrow evaluation in April. We'll see.

For similar reasons, you may want to make your January mortgage payment in the last few days of December, instead of in January.

I did see one article that said the bill may only really exclude prepayment of income taxes, and either doesn't or can't exclude the prepayment of property taxes. But I didn't dig at it and don't know if they were off their rockers or not. They definitely seemed to be swimming against the current on that one compared to everyone else.

Right. Agreed. The bill prohibits prepaying state and local income taxes. That does not seem to include 2017 Q4 estimated taxes. It is silent on property taxes. So prepaying 2018 property taxes might be okay. It might be tax avoidance. My 2018 taxes are due in June and December, so I'm not worried about it.

 

[havaneselover]

So far I haven't seen any calculator that correctly predicted the impact on my taxes. I've actually read the bill, and setup my own spreadsheet with the changes that apply to my situation to see the impact. The calculators have been off wildly.

The bill was basically in flux until yesterday. I also did what you did.
This calculator is the most accurate one I have seen. I estimate I'll save $1500. This one says $1,587.
http://taxplancalculator.com/calc

 

[MomToOne]

The bill was basically in flux until yesterday. I also did what you did.
This calculator is the most accurate one I have seen. I estimate I'll save $1500. This one says $1,587.
http://taxplancalculator.com/calc

That one still doesn't get anywhere near what the real change is for my situation. It's off by over 50%.

The few changes that were made between Friday and yesterday don't impact most individuals.

 

[DisneyMandC]

Does anyone know if the $250 teacher credit was kept? I know there was a lot of talk about it not being included in the original bill, but then I never heard anything else.

 

[havaneselover]

That one still doesn't get anywhere near what the real change is for my situation. It's off by over 50%.

The few changes that were made between Friday and yesterday don't impact most individuals.

My point is a lot of people don't understand the changes and only are hearing the negative impacts when they may actually see a tax cut. We're a pretty informed group, so that may not be the case here. But for some people, playing with a tax calculator may give them a better idea of the direction and magnitude of the change for them.

 

[havaneselover]

Does anyone know if the $250 teacher credit was kept? I know there was a lot of talk about it not being included in the original bill, but then I never heard anything else.

Yes.

It also allows 529s to be used for secondary education.

 

[RustManFan]

We pay our property taxes quarterly so next payment isn't do until Feb. 1st. I won't pay early since I have Christmas and WDW trip charges to pay off first!

Annually my bill is between $9,000 and $9,500 so I won't have much additional to deduct for the $10,000 cap.....

 

[MomToOne]

My point is a lot of people don't understand the changes and only are hearing the negative impacts when they may actually see a tax cut. We're a pretty informed group, so that may not be the case here. But for some people, playing with a tax calculator may give them a better idea of the direction and magnitude of the change for them.

I think just the opposite - I've played with different calculators, and they have said everything from I'm going to pay 8% more in taxes, to I'm going to pay 20% less. I think anyone who trusts a calculator to even get the general direction - good or bad - will be making decisions on pretty bad info. If you need to, go to a tax professional to get a feel for how you will be impacted next year. It will probably be money well spent.

Reality for me is that it is pretty much a wash next few years. (Now when I lose my HOH status once DD17 is done with college, well then I'm screwed under the new plan because my state income tax will go through the roof, and I won't be able to take a full deduction for it because of the 10K income+property tax deduction limit.)

 

[tvguy]

Not going to impact the "average" American if you go by the numbers.
Average property tax bill in the U.S. is $3296 according to ATTOM Solutions, a Real Estate tracking company. So $10,000 cap is three times that.
The average price of an existing home sold in the U.S. is $248,000 YTD in the U.S. The average price of a new home in the U.S. is $372,400 YTD in 2017. So a $750,000 cap on mortgage interest won't impact most folks.
The median income is $52,250 in the U.S. according to the U.S. Census.
So if you are impacted, you may not be rich, but you are more affluent than the average American if you go by the numbers.

Residents of 10 counties in the 2200 plus counties in the nation will be most impacted negatively by the tax bill according to this article.
https://www.attomdata.com/news/home...s-could-be-most-impacted-by-gop-tax-proposal/

 

[havaneselover]

I think just the opposite - I've played with different calculators, and they have said everything from I'm going to pay 8% more in taxes, to I'm going to pay 10% less. I think anyone who trusts a calculator to even get the general direction - good or bad - will be making decisions on pretty bad info.

Reality for me is that it is pretty much a wash next few years. (Now when I lose my HOH status once DD17 is done with college, well then I'm screwed under the new plan because my state income tax will go through the roof, and I won't be able to take a full deduction for it because of the 10K income+property tax deduction limit.)

Maybe you're situation is fairly unique and that's why the calculators don't work well for you??? I personally think they're useful.

 

[TNixon123]

Holy cow property taxes are high in some places! We may have some backwards people in Sweet Home Alabama but I'll take my $750 property taxes I paid this year on 1900 Sq ft and a 15 acre plot.

Sure income here may also be lower but not that disproportionate!

Good luck to everyone!