Release of final tax bill details

[ERD50]

https://taxfoundation.org/property-t...ed-assessment/

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The IRS guidance issued today means that many individuals who prepaid might not benefit. According to the guidance, an individual’s property tax liability must be paid in 2017 to be deductible, but it must also be assessed. Estimating your property tax liability isn’t enough. The property tax must be billed too. Already, tax attorneys are on Twitter arguing over what a property tax assessment must contain and whether localities could issue them in the few remaining days of the tax year, so we haven’t heard the last on this issue.

I wrote to my county treasurer to ask if there is anyway they could bill us before year end, maybe just declare them somehow. Don't expect a response, don't know if there is time to figure if this could even be done, but it's something.

I think there will be a lot of political pressure to allow them to be deducted though, so I think something will be done. It affected a lot of people.

-ERD50

[audreyh1]

When we bunched payments of property taxes in the past, we were always paying the prior year's taxes in Jan (due by Jan 31 of current year without penalty) and the current year's taxes billed by Oct 31 of the current year in Dec.

When we get the bill for current year property taxes in Oct, it can be paid without penalty until Jan 31 of the next year, and thereafter it they start to add a rather steep penalty.

[ERD50]

Just missed your post while typing...

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Originally Posted by pb4uski FWIW, I don't think today's advisory plowed any new ground, but just reminded practitioners and taxpayers what the existing rules are.

I was wondering that, I really don't know - any way we can confirm that?

I'll still bet that a lot of people claimed the deduction in previous years and it was accepted, even if it wasn't correct to do so. That will at least add to the pressure to allow it for 2017, even if it has no legal standing.

-ERD50

[meierlde]

Quote:

Originally Posted by audreyh1 When we bunched payments of property taxes in the past, we were always paying the prior year's taxes in Jan (due by Jan 31 of current year without penalty) and the current year's taxes billed by Oct 31 of the current year in Dec. When we get the bill for current year property taxes in Oct, it can be paid without penalty until Jan 31 of the next year, and thereafter it they start to add a rather steep penalty.

That is the way it works in my county in Tx you get the bills in Oct and they can be paid without penalty until Jan 31. The bill says property taxes due by Jan 31. So in the past you could bunch by paying nothing 1 year and in jan and dec the next year.

[pb4uski]

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Originally Posted by ERD50 .....any way we can confirm that?....

From Publication 17:

Quote:

Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. The tax must be imposed on you. You must pay the tax during your tax year. The tax must be imposed on you. In general, you can deduct only taxes imposed on you. Generally, you can deduct property taxes only if you are an owner of the property. If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. You must pay the tax during your tax year. If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. If you pay your taxes by check and the check is honored by your financial institution, the day you mail or deliver the check is the date of payment. If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment.

If the town or county has not assessed the tax then it has not been imposed on you.

Also, note the following with respect to state income taxes:

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Estimated tax payments. You can deduct estimated tax payments you made during the year to a state or local government. However, you must have a reasonable basis for making the estimated tax payments. Any estimated state or local tax payments that aren’t made in good faith at the time of payment aren’t deductible. Example. You made an estimated state income tax payment. However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. You had no reasonable basis to believe you had any additional liability for state income taxes and you can’t deduct the estimated tax payment.

So in the example above, it someone made a estimated state income tax payments in 2017 and their 2017 tax was so much lower that they got a huge refund refund then you can't deduct the estimated tax payment (or perhaps just the huge refund).... the advisory is same principle but applied to property taxes.

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Originally Posted by ERD50 ....I'll still bet that a lot of people claimed the deduction in previous years and it was accepted, even if it wasn't correct to do so. ...

There is a big difference between lack of detection and acceptance. IOW, if you did it and didn't get audited or questioned, it doesn't mean that it was accepted... it means that your non-compliance was not detected.

But it would not surprise me that there have been many instances in the past where non-compliance has not been detected.

[Travelfreek]

I paid $3500 today that was billed but not due till April '18. I called our mortgage company to get permission since our mortgage payments include impound account. They said to send them confirmation statement of paid prop tax and they'll deal with it (I imagine they will recalc our payment to accommodate the shortfall in what's needed to pay taxes and ins for remainder of '18.

The county we live in said I could only prepay amount billed which is half of our yearly prop tax. It would have been great if we could have paid the full $7000 yearly prop tax.

[walkinwood]

I wonder what the ruling means to us in Denver. We pay taxes in arrears. ie. we are billed for 2017 property taxes in early 2018.

I pre-paid this morning. If I can deduct great. If not, no big loss. I will not have enough deductions to itemize next year.

[ERD50]

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Originally Posted by pb4uski From Publication 17: //NOTE: see the earlier post, I won't bother with cut/paste here// If the town or county has not assessed the tax then it has not been imposed on you. .....

Thanks for the source. It looks like my son will be OK in Cook county. They were limited to a 1st installment pre-payment, which is 55% of the previous year's bill, and adjustments are made to the 2nd installment. So while there was griping about not being able to pay the whole thing, it looks like this is established before the end of the year, so apparently meets the requirement.

I'll add though, since this appears to be have been standard policy, it sure is amazing that given all the attention this has got (it's been all over the news here, people waiting in line to pay, extra hours from staff, last minute changes to allow more flexible payment options, etc), that the IRS didn;t come out with that statement right away, and make it clear that this is not "new" (many sites are reporting it that way).

And I'll go further, this is a bit of a rant, but we have the premise that "ignorance is no excuse" when it comes to obeying laws. Fine, I get the need for that. But I think it comes with a responsibility from our lawmakers - laws should be simple enough for everyone to understand. It appears that even many accountants were advising their clients to prepay, and were unaware of the specific requirements. The only way I can get away with ignorance of the law is to be declared insane or incompetent. So laws should be simple enough for the barely sane/competent to understand.

Quote:

Originally Posted by pb4uski ... There is a big difference between lack of detection and acceptance. IOW, if you did it and didn't get audited or questioned, it doesn't mean that it was accepted... it means that your non-compliance was not detected. But it would not surprise me that there have been many instances in the past where non-compliance has not been detected.

I fully understand and agree. I've often been told by people, that they do this or that on their taxes, and have always done it that way. And I say that doesn't make it legal/right, though you may never get questioned on it.

I normally err on the side of being very conservative with my taxes. But on this one, I just might end up being confused, and claim it anyway. Seems the worst could happen is it get rejected and I have to pay. I don't think these payments are linked in the same way that, say a 1099 is. And I don't expect fines for such a confusing situation.

-ERD50

[sheehs1]

From what I remember after having read parts of the bill (a week ago) , the $10,000 tax deduction limit includes taxes paid such as property AND state income taxes. If this is correct, then I was always over the limit since I was able to deduct my state taxes paid on my Federal Return.

Am I reading this correctly or did the deduction for deducting state taxes as part of this bucket go away?

For property taxes, even with the new condo purchase I am below the $10,000. I am above the limit if state taxes are included in that.

I have always (the last 25 years anyway) had to pay Quarterly estimates for both Federal and State or was penalized. (meaning I had no choice!).

[Texas Proud]

As to being right and being accepted on a tax return..... I have had conversations with a number of people who do things not quite right and I say you are just playing audit roulette.... as long as you do not get caught then you are good...

If I were in a high tax state and prepaid 2018 I would deduct it and let them find it... but being in Texas I double up anyhow.. and do not want to pay 2018.... heck, I have not paid 2017 yet....

[FIRE'd@51]

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Originally Posted by sheehs1 From what I remember after having read parts of the bill (a week ago) , the $10,000 tax deduction limit includes taxes paid such as property AND state income taxes. If this is correct, then I was always over the limit since I was able to deduct my state taxes paid on my Federal Return. Am I reading this correctly or did the deduction for deducting state taxes as part of this bucket go away?

You are correct that the 10K includes both property taxes and income taxes. The House bill had limited it to just property taxes. BTW, I assume that the car tax can be included as well since it is a personal property tax based on value.

[donheff]

DC says they have completed the 2018 assessment process so our payments can be deducted.

[sheehs1]

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Originally Posted by FIRE'd@51 You are correct that the 10K includes both property taxes and income taxes. The House bill had limited it to just property taxes. BTW, I assume that the car tax can be included as well since it is a personal property tax based on value.

Thanks FIRE'd@51. That what I thought too.

[audreyh1]

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Originally Posted by ERD50 Isn't there a significant number of people who double up on various deductions every other year? I bet many of them prepaid their property taxes, and it got accepted, and I bet along the way some of them were even audited, and it was allowed. -ERD50

Just to reiterate - a lot of doubling up was not pre-paying anything. It was paying property taxes assessed in two different years in the same year, and both were billed. Some states don’t require you to pay by the end of the year to avoid penalty, they may have penalty free due dates that extend into the next year. So you can pay prior year’s assessed taxes early in the year, and current year’s assessed taxes late in the same year.

[scrabbler1]

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Originally Posted by audreyh1 Just to reiterate - a lot of doubling up was not pre-paying anything. It was paying property taxes assessed in two different years in the same year, and both were billed. Some states don’t require you to pay by the end of the year to avoid penalty, they may have penalty free due dates that extend into the next year. So you can pay prior year’s assessed taxes early in the year, and current year’s assessed taxes late in the same year.

This "bunching" is what I did with 4th quarter estimated state income taxes a few times over the years. I'd pay the 4th quarter of YEAR-1 in early January and the 4th quarter of YEAR in late December. Because I never paid any estimated state income taxes in the other quarters, that juiced up the "bunching" even more.

[ERD50]

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Originally Posted by donheff DC says they have completed the 2018 assessment process so our payments can be deducted.

Good for you!

I wrote my Lake County, IL treasurer, asking if they could somehow release the 2018 amounts due as being assessed in 2017, but (at least he responded), said there is no way they could do that.

I wrote back, reaffirmed that I don't understand why Lake county can't do what Cook County has done - declare the 1st installment to be equal to last years 1st installment, and payable now (but not due until June as always), and make any adjustment to the 2nd installment. (Cook county actually makes the 1st installment = 55% of last years total, but I'll take the same 50% amount to make it easier for them)

Many, many citizens can save thousands of dollars with this change. And many of us stood in line and jumped through hoops to have the money available. If they make this statement now, they have until June to adjust their systems. We only had a few days to respond to the tax changes.

Why not just make the statement publicly? It doesn't affect anyone who doesn't pre-pay. If it doesn't stand up to the IRS scrutiny, at least they tried. What's the downside?

Maybe they just don't have the authority, I dunno.

-ERD50

[ERD50]

Quote:

Originally Posted by audreyh1 Just to reiterate - a lot of doubling up was not pre-paying anything. It was paying property taxes assessed in two different years in the same year, and both were billed. Some states don’t require you to pay by the end of the year to avoid penalty, they may have penalty free due dates that extend into the next year. So you can pay prior year’s assessed taxes early in the year, and current year’s assessed taxes late in the same year.

I understand that you are describing the correct/legal way to do it.

What I was saying was, I bet a a significant number of people have done it 'incorrectly' (prepaying based on an estimate, not a formally released assessment/bill) in the past, and it got accepted, and I bet along the way some of them were even audited, and it was not disallowed.

And I understand that doesn't make it right. But I think it will add to the outrage, and public pressure to accept it as a legitimate deduction. As I said earlier, ignorance of the law is no excuse, but I feel that means laws should be understandable, and not complicated twisted abstractions that a lot of professional accountants got wrong.

Heck, even that IRS statement, released after many people prepaid, did not make it clear that this is the way it always was. It sounds like a new ruling, and many media outlets are reporting it that way.

-ERD50