IRS: Homeowners Can Prepay 2018 Property Taxes Under Limited Circumstances

Homeowners will be allowed to pre-pay their 2018 state and local real estate property taxes before the end of the year and deduct them on their 2017 returns only under limited circumstances, the Internal Revenue Service said Wednesday.

The announcement comes after many homeowners in states with the highest property taxes rushed to prepay their 2018 property taxes in hopes of saving on their federal taxes since the deduction will be scaled back in the tax law passed by Republicans last week.

The IRS in its statement said taxpayers can claim an additional property tax deduction on their 2017 returns if taxes are assessed and paid for before the end of the year. Some states and localities allow people to prepay their state and local taxes, including property taxes, but other states and localities that don’t will have to interpret exactly what that means for their residents.

In the new GOP bill, taxpayers who itemize will only be able to deduct a maximum of $10,000 in state income, property, and sales taxes. Under the old system, a homeowner could deduct all these taxes from their federal income tax liability.

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