Question: With the new tax bill signed, next year there will be a max of $10k of deductions between property taxes and state income taxes paid. Should I pay the next property tax payment (not due until April 2018) before the end of December? Should I repay state taxes as well?
Answer: the newly signed 2017 Tax Cuts and Jobs Acts limits the itemized deduction for state and local income tax and property taxes to $10,000 starting 2018, and it also repealed the deduction for foreign property taxes.
To block people from prepaying state and local income tax relating to the 2018 tax year in 2017, it added a provision to disallow 2017 tax deduction any state and local tax payments related to 2018.
Take away from the bill: 1. Nothing is said about 2017 state tax liability. 2. Nothing is said about prepaid property taxes. Therefore, prepaying property taxes and pay 2017 state tax liability if you think you will owe on April 15, 2018, might be worth it.
However, if you will fall into AMT trap, prepaying the taxes mentioned above has no benefit. Not sure if you are in AMT, this is the time to call your CPA to do a tax projection for you.
For more free tax information, see Tax Explained in Plain English.
If you would like to make an appointment to discuss more, please give this office a call 415-704-8989 or email me at ymckee@virtualcpaforyou.com. Book a meeting online. More articles see www.virtualcpaforyou.com
Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.