The United States Revenue Service has released a guide on 2018 real estate tax prepayments for the year.

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The US Internal Revenue Service (IRS) reported that taxpayers who pay property tax for 2018 a year before the end of 2017 will, under certain conditions, be able to deduct this amount from taxable income for 2017 a year. This explanation service posted on its site.

Act of tax reform, signed by President Donald Trump on December 22, limits the amount of local and state tax deductions for 10 real estate to thousands of dollars. Previously, it was possible to deduct the amount of this tax without restriction. This tax innovation will hit hard on those states whose residents pay the highest real estate taxes in the country.

Since tax reform was adopted in the last days of 2017, Americans began to pay real estate taxes in advance. At the same time, taxpayers did not know whether they would be able to write off this amount from taxes for 2017 a year. In this connection, the United States Revenue Service issued this clarification.

One of the main conditions for the previously paid real estate tax for 2018 to be written off from taxes for 2017 is that its amount must be determined in 2017 and it must also be paid in 2017.

As an additional explanation, the IRS provides the following examples:

Assume County A approves property taxes on July 1, 2017, for the period July 1, 2017, through June 30, 2018. On July 31, 2017, District A issues notices to residents to assess and issue property tax bills requiring payment of two installments: the first by September 30, 2017, and the second by January 31, 2018. If a taxpayer paid the first installment in 2017, he can pay the second installment by December 31, 2017 and deduct this amount from his 2017 tax return.

However, there are limitations. The IRS also suggested the following as an example of an invalid prepayment:

District B also assesses and accepts property tax payments from its residents on July 1, 2017, for the period from July 1, 2017, to June 30, 2018. District B intends to conduct a regular assessment in July 2018 for the period from 1 July 2018 to 30 June 2019. However, since county residents are willing to pay their taxes for 2018-2019 years in 2017 ahead of time, District B has revised their computer systems to accept a prepayment for property taxes for the 2018-2019 year. Taxpayers who pay their property taxes for 2018-2019 of the year in 2017 will not be eligible to deduct the prepayment in their federal tax returns, as the county will not evaluate property taxes for 2018-2019 of the year before 1 in July 2018 of the year.

Difference? There is not enough advance payment: taxes must be assessed in order to be able to write them off in the 2017 year declaration.

Consult with your tax specialist if you have any questions about whether to pay a property tax prepayment before the end of the year.

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