Find Out by Reading All The Pros and Cons of Doing This Below
- What are Prepay Property Tax?
- The IRS
- Prepaying Property Taxes
- Who is Restricted from Paying Early?
- Final Thoughts
- Tips
New tax legislation has restricted the amount taxpayers can deduct from their property taxes and other state and local taxes for the yearly tax returns. This amount is $10,000 and it came into being in January of 2018 which means the taxes you file for 2019 will be completely different from your 2018 taxes. These Deductions are worrying homeowners and property holders who pay taxes in high-tax states. To reduce the pain of such as large tax, many homeowners are looking to prepay their property taxes before the end of the year so that it can be deducted from their previous year’s tax bill. Doing so I smart way to get a financial burden taken care of, but have the capital early isn’t easy for a lot of people and it may not be the thing to do for many people.
What are Prepay Property Tax?
To begin with, if you make under $100,000 and do not pay near $10,000 in property tax you don’t need to worry about this change or if you take a standard tax deduction. If you itemize your tax deductions this is a change you need to consider. If you are in the group of 30% of people who do this need to look at your finances to make this next year’s taxes work.
If you are one of the people with one of the above situations that you can look to save thousands by prepaying your property taxes before the December 31st deadline. The Current SALT Deductions for property taxes allow the property owner to deduct an unlimited amount of property taxes before this deadline. If your tax bill exceeds the $10,000 tax bill it is worth visiting or calling your local tax office to see if you can pay early.
The IRS
The IRS advises the property taxpayers in December about whether or not a property taxpayer with high deductions and local real property taxes can make their property taxes early. The government doesn’t have the numbers yet for people seeking prepayment for state or Federal taxes.
If you want to prepay early if you will need to check with your state and local county assessment schedules. If they do not align, you will not be able to pay early. You can only deduct what has been already assessed even if your country accepts second scenarios payments such as if your county ‘s assessment is from June 1 to June 1 of the next year than you can’t pay for the next year in advance because they do not align.
Each state has their own way of treating these tax bills so you will need to check with your local government for the finer details of what is and what is not applicable for your area and what is allowable by the local government about paying you scheduled taxes early. It is not yet known how the IRS is handling the early payments of the taxes. It is not known if state taxes will be placed above IRS guidelines for prepayments.
Prepaying Property Taxes
To start the prepayment, you need to get in contact with the office that collects property taxes or your town supervisor’s office. You can find this information on your state and county’s home pages. You can also check your last year’s property tax bills to find contact information because it depends where your property is located. They often will contain their address and a website as well as maybe an office location. There are also areas that allow for the bills to be paid electronically so you may have it saved on your computer or in your email somewhere.
Who is Restricted from Paying Early?
Using an escrow service or account can restrict you from paying early. Your mortgage bill gets charges added to it if your bank withholds money for taxes and insurance purposes. When your property taxes or insurance payments come due the bank uses that extra money to pay the bills. If you try to pay early you could trigger an IRS investigation because your bank and your own records won’t match. You will need to keep careful records and have your supporting documentation ready if that is the case because while an audit isn’t a bad thing, it will take time to fix and correct the inconsistencies.
An alternative minimum tax is a result if you can’t pay early. If your county can’t assess your property for taxes early, you can’t pay early. Your county may also have its own restrictions based on the location of the property and the state and country taxes that are applied to it. What you are able to do can be different from your friends, family and work colleagues because different laws and jurisdictions are applied to each area and your properties will not all be treated the same. Each of you will need to research state and county taxes to figure out what will and will not work for your taxes.
Final Thoughts
It also breaks down to whether or not you itemize your deductions because if you do not you will not need to pay early. This is a way to save yourself money if you are one of the higher earners or have other property expenses to pay. Taking advantage of the prepayment option can save you money. It also will depend on whether or not you can have an assessor review your property early and it all lines up with your bank paperwork.
This all depends on the IRS as well because they are the ones that need to make the new tax laws work and apply the appropriately across the country. Prepayment may come up to them as something they cannot do, but the verdict isn’t in on that one yet.
Tips: Start early on preparing your next year’s taxes by looking at the different deductions you can take and reviewing the best tax programs that can save you money and make filing your end of year’s taxes easier.
