Toledo Talk

Pre-Payment property taxes

http://www.toledoblade.com/local/2017/12/28/Property-owners-scramble-to-pay-ahead-of-federal-tax-overhaul.html

Blade is reporting an up tick in this to avoid 10,000 deduction limit next year. I have been advised that "The cofrence bill short-circuits any immediate year endbtax planning. With a provisuob that disallows prepayment of taxes imposed after 2017." Has anyone heard similar advice.

created by In_vin_veritas on Dec 29, 2017 at 08:23:15 am     Comments: 14

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This is what the IRS says:

"In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed."

In Lucas County, the auditor's office has already posted 2018 tax liabilities on each property owner's 'account' (as you can see by looking at AREIS). So, I think this is reasonable grounds to say that it has been assessed, and therefore can be taken as a deduction in 2017 if paid in 2017.

This is actually not something new; people have been pre-paying property taxes for the tax deduction in Ohio for decades.

FYI - I am a JD/CPA; though I am not actively practicing I do keep up on tax changes.

posted by not_me on Dec 29, 2017 at 09:47:49 am     #  

I'm no expert, but I think it depends on the date the property tax was actually assessed. The bills due in 2018 are for taxes assessed for the year 2017. Thus deductible in 2017 if paid in 2017.

But, I'm NOT an expert. Just from what I've gleaned from some accounting firms' online publications and postings.

I did pay the taxes assessed for the first half of 2017, due in January 2018 ahead. I didn't pay the second half of 2017. Although I may write another check today and mail it in.

posted by holland on Dec 29, 2017 at 09:49:11 am     #  

Holland I believe you are correct. The Blade storey is misleading as it says the "1st half 2018 bills' when these are actually bills for the 1st half of 2017 taxes.

posted by In_vin_veritas on Dec 29, 2017 at 09:58:17 am     #  

I forgot about that whole paying-a-year-behind thing in Ohio.

posted by not_me on Dec 29, 2017 at 10:29:10 am     #  

Holland is correct, although the person I spoke to at the Wood County Treasurer's Office said not all Ohio counties operate the same way.

Luckily the way Wood County assesses and collects, taxpayers there will be able to deduct the payments in 2017 if they pay early.

I'm not sure about Lucas County.

posted by shamrock44 on Dec 29, 2017 at 11:33:19 am     #  

holland posted at 09:49:11 AM on Dec 29, 2017:

I'm no expert, but I think it depends on the date the property tax was actually assessed. The bills due in 2018 are for taxes assessed for the year 2017. Thus deductible in 2017 if paid in 2017.

But, I'm NOT an expert. Just from what I've gleaned from some accounting firms' online publications and postings.

I did pay the taxes assessed for the first half of 2017, due in January 2018 ahead. I didn't pay the second half of 2017. Although I may write another check today and mail it in.

And to muddy the waters even further:

At least in Wood County, the assessor's office said they don't go by postmark date - they go by the date received.

posted by Foodie on Dec 29, 2017 at 11:46:30 am     #  

At least in Wood County, the assessor's office said they don't go by postmark date - they go by the date received.

That may be when they marked it for their purposes as paid i.e., is it late, but individual tax payers are on a cash basis so it would be considered paid when it was mailed.

I did find this on Cuyahoga county's website:

First Half 2017 Real Estate Taxes are due January 25, 2018.

In accordance with state law, property taxes are billed at the end of the year in which they are assessed; For instance, the taxes billed in December 2015 (payable in 2016) are the tax charges assessed for the “first half” of 2015 (January – June) and the “second half” of 2015 (July – December). In this example, the “first half” billing is due in January of 2016 and the “second half” billing is due in July 2016.

posted by not_me on Dec 29, 2017 at 11:58:26 am     #  

Well, my boss lives in Fashionable Perrysburg Twp. and was told she had to physically bring the payment in prior to 12-31-17 for it to count. If she mailed it and it arrived after 12-31-17 - sorry, no soup for you!

I have no idea if that is correct but that is what she was told. Since her annual prop taxes are in excess of $12k, she rushed in with a check.

posted by Foodie on Dec 29, 2017 at 02:33:33 pm     #  

Foodie posted at 02:33:33 PM on Dec 29, 2017:

Well, my boss lives in Fashionable Perrysburg Twp. and was told she had to physically bring the payment in prior to 12-31-17 for it to count. If she mailed it and it arrived after 12-31-17 - sorry, no soup for you!

I have no idea if that is correct but that is what she was told. Since her annual prop taxes are in excess of $12k, she rushed in with a check.

It's just a matter of different jurisdictions with different governing rules, and they really don't realize or understand the difference. Wood County Treasurer does not dictate to the IRS when or how itemized deductions can be claimed, they just process payments.

But with that said, and given all of the pandemonium on this issue, the reality is that taxpayers do not submit with their tax return proof of payment and the IRS does not have the staffing to make every person who claims a larger-than-normal SALT deduction in 2017 prove that they actually made a payment on a tax that was assessed. So that leaves a handful of taxpayers who get a random audit or a targeted audited that is generated for some reason other than paying property taxes early.

Disclaimer: this is not to say anyone should report a deduction that they know to be invalid. I'm just saying the hysteria is not necessary although it is amusing.

posted by not_me on Dec 29, 2017 at 03:27:37 pm     #  

I did stand in a very, very long line yesterday at the Treasurer's office and paid the second half of the 2017 assessed taxes, which aren't due until July 2018. So I paid the first half by mail, which was recorded prior to Dec 31 and the second half yesterday, at the deadline. What a circus.

The office staff was outstandingly organized and helpful in handling an absolute crush of people.

BTW Wade Kapszukiewicz was there and we chatted. About the Regional Water District. He's committed to accomplishing this by month four of his administration. He's genuine and delightful to talk to. I wished him well.

posted by holland on Dec 30, 2017 at 09:42:13 am     #  

I also prepaid mine for the year. It is because you will need $12,000 in deductions to itemize in 2018 and seeing I wont have 12000 in deductions in 2018 I may as well get the tax savings for 2017.

posted by jamesteroh on Dec 30, 2017 at 04:44:08 pm     #  

jamesteroh posted at 04:44:08 PM on Dec 30, 2017:

I also prepaid mine for the year. It is because you will need $12,000 in deductions to itemize in 2018 and seeing I wont have 12000 in deductions in 2018 I may as well get the tax savings for 2017.

This is actually a tax planning strategy that you may want to continue - Group your itemized deductions into every other year - odd years for you based on the 2017 tax payment you already made.

So in 2018, you minimize charitable contributions and state and local tax payments as much as you can while meeting your obligations. Then in 2019, make your charitable deductions for 2018 and 2019 and even 2020 if you're inclined; pay all of your 2019 state and local taxes and prepay what you can of 2020 - if you think you will owe a balance on your 2019 returns (which will be filed and due in 2020), pay that at the end of 2019, as well as your property taxes (keeping in mind the cap of $10,000 per year).

This will allow you to maximize the use of your itemized while taking the standard deduction as a minimum on the even number years. Heck, if you think you will owe taxes on your 2017 state and local tax returns, write out checks today and drop them in the mailbox by midnight. Or, I just checked, you can make payments to Ohio online or via phone today - at least you could print a receipt dated today (I assume). That would include School District. Cities would have to be mailed.

This is a tax planning strategy that I have recommended to many clients, typically retirees who no longer have mortgage interest deduction so their ability to itemize diminishes. It doesn't apply just to charitable contributions and state and local taxes, but those are the most easy to manipulate. Mortgage interest can't be manipulated, much of miscellaneous itemized has been eliminated in the tax bill, and I never recommend delaying necessary medical expenses (though I personally have several elective/monitoring procedures that will be done next year so as to utilize my high deductible health plan to my benefit, so it can be done).

posted by not_me on Dec 31, 2017 at 01:09:02 pm     #  

One of my sisters prepaid her Lucas County property taxes for the year and mailed hers in on Thursday. Their tax accountant told them if they could afford to make the prepayment to do it. She told her CPA she wouldn't be able to make it downtown to make the payment by Friday and he told her as long as the check was in the mail by year end she could take the deduction regardless of then Wades office received or posted it.

posted by classylady on Jan 02, 2018 at 11:02:50 am     #  

That's probably the case classylady. But I did call the audito'rs office on December 31 about that very same concern. According the them the payment had to be in their office by December 31. So I went down there and stood in line. With about 100 other people.

posted by holland on Jan 02, 2018 at 03:52:37 pm     #