Tips for Prepaying Property Taxes

Tips for Prepaying Property Taxes

There are thousands of taxpayers lining up to prepay taxes of their property before implementation of the tax laws in the upcoming New Year. Initiating January 1st, local and state tax deductions may be capped at dollar 10,000. Prepaying property taxes can be a valuable investment for you before ending the current tax year. It allows you to enhance your threshold deduction for the taxes of the current year. 

Jill Schlesinger, the business analyst of CBS news, said that you have to ask yourself “is it an itemizer tax year or may I claim the almost double average deduction?”

If you want to itemize the upcoming tax year, you can claim over the level of $24,000 (standard deduction for each couple). You can get a local tax deduction of over $10,000. It is a local and state income tax along with your property tax. It may not work in each country because several states fall into the category of high-tax states.

If you are interested in prepaying property taxes, it may thrust you in a substitute least tax scenario where you may not see actual benefits. The IRS has guidelines for the prepayment of property taxes. 

The IRS said that a prepayment of real property taxes that will not be assessed before 2018 would not be deductible in 2017. If you want to get the advantage of prepaid property taxes, you should hire an accountant or tax preparer.   

Things You Should Know About Prepaying Property Taxes

The guidance of the IRS upended the plans of several taxpayers for paying their property taxes early to claim special deductions before the implementation of new tax law in January. If you are thinking about to prepay taxes in 2018, you should consider these things: 

Evaluate Tax-assessment Dates

You have to get an assessment of property for 2018. Several states may bill their taxpayers throughout a year. If you have already received a tax bill for 2018, it is essential to pay this bill to claim federal deductions. 

For example, taxes of Iowa property are semiannually paid their residents received the due bill in the early months of 2018. These individuals could pay their taxes to get particular benefits.   

Some jurisdictions assess their properties without sending bills. They may obtain a gray area. The Columbian district has evaluated the properties of their taxpayers, but they have not received their bills. They can get deductions by making payments before the end of a year.

Be careful with the AMT 

You have to ensure that by prepaying taxes of your property, you will not become eligible for the payment of AMT (alternative maximum tax). It is a separate system of tax that is designed for people to prevent the use of legal tax breaks to avoid the payment of entire taxes applicable to the households with high-income. 

By prepaying property taxes 2018, you soar national tax deductions. You can hit a threshold that may need you to make AMT payments. If you are already paying AMT, you may get little or no benefits from prepaying property taxes.   

Ensure that Your Local and State Tax Bill is High

Before prepaying property taxes, it is essential to determine whether local tax bill and total state bill will exceed the cap of $10,000. If you are consistently paying lower than $10,000 in local and state taxes, you will be able to deduct a particular amount for payment in your local and state governments.

Keep it in mind that individual situation of taxes allow you to prefer standard deductions that the law may increase to $12,000 for people, $18,000 for family heads and $24,000 for wedded couples filing a joint return.

Talk to a Mortgage Providers

Several homeowners make the payment of their property taxes via an escrow account adjusted by mortgage providers. In this way, they can send a monthly payment to their mortgage company. After receiving payment, the company will manage the payment of essential taxes.

If you want to prepay property taxes, you have to inform your mortgage company to avoid the payment of taxes twice.  

Finally, you will need expert advice from a tax preparer or accountant before prepaying property taxes. You must have a reliable person to handle every complicated situation.

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