Mitch McConnell says Congress can sell American people on tax reform
A handful of Twin Falls property owners scrambled to prepay their 2018 property taxes this week, hoping to maximize their tax deductions before the new GOP tax overhaul kicks in. Dennis Brown was one of them.
Brown, an accountant in Twin Falls, was aware the bill President Donald Trump signed into law last week includes a $10,000 cap on the amount of state and local taxes people can deduct from their federal taxes — and it also ups the standard deduction.
He and the others prepaying their 2018 taxes believed they could use that as a deduction on their 2017 tax returns. But now, it appears that won’t be the case.
The Internal Revenue Service on Wednesday announced that taxpayers prepaying 2018 property taxes can deduct those for 2017 only if those taxes have already been assessed.
“A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017,” the IRS said.
County assessors in Idaho typically mail assessment notices in June.
Even if they had been assessed, if your mortgage company is collecting escrow to pay property taxes, it’s more difficult to see how or if prepaying would help you. So before you rush off to prepay property taxes, it would be wise to contact your tax preparer, county treasurer and lender (if applicable).
“It can be a strategy in certain situations,” Brown had said early Wednesday afternoon. “The problem is, of course, they passed this bill a week ago. Nobody has their head wrapped around this just yet.”
He’d already reached out to a few of his clients whom he’d felt would benefit from the prepayment, before the IRS made its announcement about assessments.
Similar situations have been playing out nationwide. Reports have particularly focused on states like New York, California and Illinois, but Idaho counties are seeing concerned taxpayers, too.
The Ada County treasurer was not in her office Thursday. No one else with the county was willing to comment on whether people sought to prepay taxes there because of the new tax law.
Blaine County Treasurer John Davidson said he has recently seen people attempting to prepay their 2018 property taxes. He could not, however, attribute it all to the tax overhaul, noting that some property owners there are already on monthly prepay plans or had other reasons to pursue prepaying.
The Idaho State Tax Commission has been receiving calls from people asking about prepaying not only their property taxes, but also income taxes. It’s legal to prepay your income taxes for 2018, but the new tax law expressly says you can’t deduct those taxes this year; they’ll be subject to the $10,000 cap.
One person even walked into the commission’s Boise office hoping to pay their property taxes, but was redirected to the county treasurer’s office
The commission does not give out tax advice. It recommends talking to a certified public accountant about whether it makes sense to prepay taxes.
At the Twin Falls County Treasurer’s Office, “There is a little bit of an increase in people inquiring about it, and a few have come in,” said Janet Wilson, a seasonal employee who helps with tax collection.
Wilson said those who prepaid were basing those payments on estimates using their 2017 property tax — the first half of which was due Dec. 20. All 2017 property taxes had to be paid before 2018 taxes could be prepaid, Wilson said.
According to the Twin Falls County Treasurer’s Office’s list of frequently asked questions, prepaid funds will not be refunded and will need to be used for upcoming taxes.
Aside from the $10,000 cap on state and local tax deductions, the standard deduction in 2018 will rise from $12,700 to $25,000 — resulting in lower taxes for many in the Magic Valley, Brown said.
The new tax bill will take effect Monday.
Statesman reporters Ruth Brown and Audrey Dutton contributed to this report.