This is another letter to update you on an aspect of the new tax act. This one deals with the new limitations on deductions for state and local taxes, and, in particular, property taxes. This is not intended as legal advice for your particular situation, so please consult your tax advisor ASAP.
Much has been said, printed and spread through the web and social media about pre-paying your 2018 property taxes in 2017, so as to get the deduction for those taxes this year. Two reasons: 1st to pay in a year in which there is no cap; and 2nd to get use out of the deduction when next year’s standard deductions will be about double what they are this year.
WAIT !
Hold up on that and don’t rush to the tax offices to pay your 2018 property tax. The IRS has already said unofficially that they are going to allow deductions for prepaid 2018 property tax ONLY IF the tax is ASSESSED in 2017, but NOT if the tax is assessed in 2018.
If your property is located in Texas, check with your local taxing authority to see when they have assessed the 2018 taxes. Generally, the assessment is made during the year. That is, 2018 assessments are made in 2018. I don’t think that there is any statutory authority for a tax assessor in Texas to assess for 2018 taxes during 2017.
So if you double-pay your 2017 Texas property taxes hoping to pre-pay for 2018, you may be in for a reversal of that deduction, assessment for more income tax, plus penalties for underpaying your income taxes and perhaps also for a negligence penalty.
In some other states, taxes are assessed at other times, and the tax assessment may cover some part of the next year. The IRS’s unofficial announcement gave an example of an unnamed jurisdiction which assesses June 30 for July 1-June 30. In the example, the IRS said that a June 30, 2017 assessment that included the first 6 months of 2018 could be paid, and deducted, in 2017. So if you own property in other states, please check the local taxing authority for more info.
Please proceed with caution but quickly.
I hope this helps.