There are only 2 days left Homeowners in high-tax states in the United States can save money by prepaying next year's property taxes

2 days left Homeowners in high-tax states in the United States can save money by prepaying next year's property taxes Homeowners in high-tax states in the United States are busy prepaying their 2018 property taxes to avoid the "...

Homeowners in high-tax states are rushing to prepay their 2018 property taxes to avoid provisions of the Tax Cuts and Jobs Act that take effect in two days. Under the new law, starting in 2018, future state income tax and real estate tax deductions can only be deducted up to a maximum of $10,000.

In existing tax laws, there is no cap on federal tax deductions for local income taxes and real estate taxes. According to U.S. tax laws, residents need to pay state and local income taxes, sales taxes and real estate taxes first, and then deduct them from federal taxes. But starting in 2018, local income taxes and real estate taxes exceeding $10,000 cannot be used to deduct federal taxes.

With two days left until the new law takes effect, some residents in high-tax states have already seen the changes and begun to take action to prepay part of their 2018 real estate taxes in advance. The reason is that the property tax deduction is calculated based on the amount actually paid (Paid) in the year, rather than the amount that should have been paid (Billed) in the year. Therefore, if you prepay part of the property tax in 2018 now, you can deduct an additional part in the 2017 tax return.

For example, if a homeowner whose real estate tax exceeds $20,000, prepays the 2018 real estate tax now, it will be included in the 2017 tax return, and will not be subject to the $10,000 deduction next year. However, the Internal Revenue Service (IRS) announced on Wednesday (December 27) that taxpayers can only prepay their 2018 property taxes after receiving a tax assessment report from the local government, and they must pay the taxes before the end of the year to be considered successful.

>Residents in high-tax states are rushing to prepay their 2018 real estate taxes

The tax law signed by Trump on Christmas Eve has prompted some local governments to modify their regulations in response to changes in federal tax laws. New York State Governor Cuomo signed an emergency order last week allowing New York residents to prepay their 2018 local and school district taxes so that they can be deducted when filing their 2017 federal taxes.

"As long as the postmark of the prepaid property tax shows that the payment date is before December 31, homeowners can use the tax deduction when filing their federal taxes this year." He said.

According to the Washington Post, the Montgomery County Council in Maryland also passed a bill allowing residents to prepay their 2018 taxes.

New Jersey Senate President Stephen Sweeney also asked Republican Governor Chris Christie to allow residents to prepay their 2018 property tax bills before December 31.

Jersey City, New Jersey Mayor Steve Fulop even expressed support on Twitter for homeowners to prepay real estate taxes for the entire year of 2018 instead of paying them half-yearly.

Washington news radio station WTOP reported that there was a long queue at the door of the government building in Fairfax, Virginia, as people wanted to prepay their 2018 bills. Because of local manpower shortage, people waiting in line were told to pay taxes by wire transfer instead.

In nearby Arlington County, Finance Department Deputy Director Kim Rucker told Fox 5 that the Christmas season is usually very quiet, but this year it has received hundreds of calls asking if 2018 real estate taxes can be prepaid, and dozens of prepayments are being received every day.

In Washington, D.C., the office of Democratic Mayor Muriel Bowser provided residents with early prepay guidance. Real estate website Zillow said homeowners in the Washington area with a median home price of $550,000 would be affected by the tax cap.

In the California Bay Area in the west, homeowners are even more eager to pay real estate taxes early. According to Alameda County Tax Collector Henry Levy, 54% of homeowners have paid their second installment of real estate taxes in advance this year, which is 3% higher than in the past.

How to prepay the 2018 property tax?

If your state allows you to prepay part of the property tax in advance, what should you do if there are only two days left?

The first step is to check the tax bureau website in your city to confirm that your home’s tax assessment report has been issued. Generally, you can check the status by entering your account ID. If your real estate tax bill has already come out, you don't need to wait for a letter to notify you. You can prepay the real estate tax now.

The second step is to keep payment records. If you pay online, save the confirmation page or receipt and other information.

However, tax experts remind that the tax law is more complicated than everyone thinks. For example, changes in the alternative minimum tax (AMT) provisions in the tax reform may also affect the tax filing results.

AMT is another tax algorithm used to prevent taxpayers from taking advantage of loopholes in tax laws to reduce the amount of tax payable. In the past, the AMT exemption amount for annual income was $53,900 for singles and $83,800 for couples filing jointly. If the amount of AMT tax exceeds the tax payable on generally calculated income, the difference between the two must be paid. The current AMT tax is approximately 28% of income.

After the tax reform, the AMT exemption amount is mentioned to be $70,300 for singles and $109,400 for couples filing jointly. In other words, if you estimate that the AMT will be triggered in 2017 (hit AMT), then neither local income tax nor property tax can be deducted, and there is no need to prepay the 2018 property tax.

Some netizens also said that although the IRS said that prepaid real estate taxes that do not meet the conditions will be rejected, if you prepay now, it seems that the worst result is to wait for a refund, and there will be no real loss. Because every family's situation is different, experts still recommend consulting an accountant before making a decision.