Did you end up deducting your prepaid property taxes for 2018?

[Anonymous]

MoCo did assess a specific amount to pay. I was told to pay exactly the amount of my prior year bill before year end.

MoCo assess property every three years. My last assessment was 2017 so my property was assessed for 2018 in 2017.

MoCo never said it was not tax deductable they just said consult your accountant

I am an accountant and I think MoCo prepayment of taxes is deductable in 2017

[Anonymous]

There is a good article in the WSJ this morning about this:

https://www.wsj.com/articles/the-hot-debate-can-you-deduct-prepaid-property-taxes-1522747980

Then on Dec. 27, the Internal Revenue Service warned that not all prepayments of 2018 property taxes would be deductible on 2017 returns. The agency said that to qualify for a write-off, the tax liability actually had to have been known at the time.

Right away, some tax specialists strongly agreed with the IRS but others strongly disagreed. The IRS and its supporters argued that those who prepaid all their 2018 property taxes can only deduct the portion that was known or determined at the time. In many cases, that means only for a few months of the year or not at all.

The IRS’s opponents argued for higher deductions of reasonable estimates. They based this argument on prior tax rulings and regulations that they think apply to this issue.

Now, three months later, little progress has been made.

The bottom line is, no one knows and if you deduct these taxes prepare to be challenged on them by the IRS, who is the ultimate authority here.

[Anonymous]

Anonymous wrote:There is a good article in the WSJ this morning about this:

https://www.wsj.com/articles/the-hot-debate-can-you-deduct-prepaid-property-taxes-1522747980

Then on Dec. 27, the Internal Revenue Service warned that not all prepayments of 2018 property taxes would be deductible on 2017 returns. The agency said that to qualify for a write-off, the tax liability actually had to have been known at the time.

Right away, some tax specialists strongly agreed with the IRS but others strongly disagreed. The IRS and its supporters argued that those who prepaid all their 2018 property taxes can only deduct the portion that was known or determined at the time. In many cases, that means only for a few months of the year or not at all.

The IRS’s opponents argued for higher deductions of reasonable estimates. They based this argument on prior tax rulings and regulations that they think apply to this issue.

Now, three months later, little progress has been made.

The bottom line is, no one knows and if you deduct these taxes prepare to be challenged on them by the IRS, who is the ultimate authority here.

False. DC told its residents in advance (prior to 12/31) what they will owe in 2018. DC residents who deducted are fine. The rest of you residing in surrounding jurisdictions may be in trouble.

[Anonymous]

You are allowed to deduct your 2018 prop tax, if, *by* December 31, 2017,
A) you had the 2018 assessment, so you knew your 2018 property tax liability
And
B) you actually paid the 2018


As some other posters have said, it will not make a difference on your 2017 return if you are subject to the AMT.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is a good article in the WSJ this morning about this:

https://www.wsj.com/articles/the-hot-debate-can-you-deduct-prepaid-property-taxes-1522747980

Then on Dec. 27, the Internal Revenue Service warned that not all prepayments of 2018 property taxes would be deductible on 2017 returns. The agency said that to qualify for a write-off, the tax liability actually had to have been known at the time.

Right away, some tax specialists strongly agreed with the IRS but others strongly disagreed. The IRS and its supporters argued that those who prepaid all their 2018 property taxes can only deduct the portion that was known or determined at the time. In many cases, that means only for a few months of the year or not at all.

The IRS’s opponents argued for higher deductions of reasonable estimates. They based this argument on prior tax rulings and regulations that they think apply to this issue.

Now, three months later, little progress has been made.

The bottom line is, no one knows and if you deduct these taxes prepare to be challenged on them by the IRS, who is the ultimate authority here.

False. DC told its residents in advance (prior to 12/31) what they will owe in 2018. DC residents who deducted are fine. The rest of you residing in surrounding jurisdictions may be in trouble.

Ding ding ding! All these Marylanders and Virginians trying to sound dire warnings because they played with fire, thanks but no thanks. DC and the IRS agree - DC homeowners are in the clear.

[Anonymous]

The issue that tax professionals have here is the the IRS guidance is merely the agency's interpretation of the law. From what I've read, there is nothing currently in the tax code or regulations to directly support the assertion that the local taxes must have been assessed during the same year. The general rule is that individuals are on a cash basis in determining income and expenses. Apparently the IRS has decided that the general rule shouldn't apply.

[Anonymous]

Anonymous wrote:You are allowed to deduct your 2018 prop tax, if, *by* December 31, 2017,
A) you had the 2018 assessment, so you knew your 2018 property tax liability
And
B) you actually paid the 2018


As some other posters have said, it will not make a difference on your 2017 return if you are subject to the AMT.

The AMT rate is 28 percent

If you are taxed at greater than 28percent and prepay pushes you into AMT you can be in AMT and save money by prepaying

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Anybody have an their CPA give guidance that said it was okay?

My CPA siad that it was not ok if the municipality had not assessed the tax, which Arlington didn't. I did not deduct them.

Same. MoCo.

Same. LoCo.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I will do so. The IRS guidance has zero statutory support as far as I can tell. The question should be whether you paid the taxes, not the assessment protocol for your jurisdiction.

Unless you are willing to take IRS to court, I'd not question IRS's authority.

The IRS has plenty of statutory authority - starting with the amount owed has to be certain. You don't even know what the rate or the value is for 2018 on December 31, 2017 - no certainty there...

Why not pay 2019, 2020, 2021, etc. in 2017 as well? Why stop at 2018?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I will do so. The IRS guidance has zero statutory support as far as I can tell. The question should be whether you paid the taxes, not the assessment protocol for your jurisdiction.

Unless you are willing to take IRS to court, I'd not question IRS's authority.

The IRS has plenty of statutory authority - starting with the amount owed has to be certain. You don't even know what the rate or the value is for 2018 on December 31, 2017 - no certainty there...

Why not pay 2019, 2020, 2021, etc. in 2017 as well? Why stop at 2018?

This. I’m in Loudoun and they are still debating the 2018 rate, voting soon. Bills are in June and Dec.

[Anonymous]

The Federal issue aside, what about deducting from the state return which allows residents to prepay, yet uses specific AGI from the federal return on the state return making this impossible. In VA there is no way to identify the difference between the federal disallow and the state allow of this deduction on any form.

[Anonymous]

Anonymous wrote:The Federal issue aside, what about deducting from the state return which allows residents to prepay, yet uses specific AGI from the federal return on the state return making this impossible. In VA there is no way to identify the difference between the federal disallow and the state allow of this deduction on any form.

OMG. I wish I had read this last night. Just did our taxes. I could have saved $200. Maybe I should file an amended VA return?