So Can You Deduct Next Year’s Property Taxes If You Pay Them This Year, Or Can’t You?

Yes And No (According To The IRS)

We were surprised by the number of emails we got after running an item about paying 2018 property taxes this year in order to get the full value of writing them off on your federal return. Because of the new tax law just passed, next year, state and local deductions on federal income tax returns (including property taxes) will be capped at $10,000. (And it’s $10,000 total whether you file as an individual or a married couple).

The IRS apparently got lots of emails as well, which prompted an official statement. Here’s a link to it. The bottom line: if you’ve already been issued a tax bill, even if part of it’s not due until next year, you should be able to pay it now and take the full deduction this year. (Many towns and municipalities do not operate on a calendar year, so it’s very possible you were issued a property tax bill in two installments, with the second installment not yet due. That’s the part the IRS says you can pay now and keep the full deduction.) Here’s the specific example the IRS gives:

“Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018.  On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018.   Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.”


However, for the people who have just been sending in checks in the hopes they’ll be cashed in 2017 and applied toward your account: No. You’ll probably be getting those checks returned. Or maybe not. But either way, that won’t be deductible. Even if your County quickly adjusted its computer system to accept prepayment of property taxes, the IRS will not permit you to deduct prepayment this year of taxes that have not yet been assessed. Here’s the example the IRS gives for that:

“County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018.  County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.”


While it would seem to make common sense that you can’t pay for something you haven’t been assessed for yet, it’s not that uncommon in some situations when it comes to taxes. In fact, under certain circumstances, the IRS requires you to pay estimated amounts. But that doesn’t look like it’s going to fly here.

Some Governors have been urging municipalities and other local governments to accelerate assessments and billing, and while it’s certainly to their advantage to get money earlier, many simply do not look like they can do it in the little time that’s left in the year.

We have a couple of other links courtesy of our readers, one from the Governor of New York (but it’s not clear whether his Executive Order authorizing local governments to levy property taxes immediately, and allowing taxpayers to make early payments is going to have any real impact in light of the IRS’ new guidance), another applying specifically to people living in California (sort of good news) and Washington State (not such good news).

So just to sum up: if you’ve got a tax bill in your hand right now, even if part of it’s for next year, you should pay it now if you’ve got the money. If not, it doesn’t look likely many counties or municipalities will be able to cook something up for you in the next couple of days that the IRS will accept. Still, it doesn’t hurt to check and keep a close eye on local news.




Trump Remains Remarkably Quiet As His Florida Holiday Continues

After scoring his big tax cut “win”, taking full credit for beating back the “assault” on saying “Merry Christmas“, and “essentially” repealing Obamacare (which he didn’t do), Trump seems to have settled down for at least a brief winter’s nap.

At least as of the time of publication of this newsletter, he hadn’t pounced on red meat thrown his way in the form of a Gallup poll showing President Obama is the man most admired by Americans, beating out President Trump by a few percentage points. (In the 70+ years Gallup’s been doing the annual poll, the sitting President has been on top more than 80% of the time).

One thing we do think Trump and “his generals” aren’t getting enough credit for is progress made in beating back ISIS in Iraq and Syria, at least partly by being less selective about who we teamed up with, and staying out of the way of others. Trump also Tweeted in praise of himself about this. But now that ISIS’ land grab seems to have been decisively reversed, what next? The Atlantic has an interesting piece addressing this question.




With Trump Not Providing Distractions, Focus Returns To The Simmering Mueller Investigation

The Washington Post reports the White House is about ready to throw former National Security Adviser Michael Flynn under the bus, while Vox reports Flynn’s brother is appealing to the White House to pardon the President’s once-close ally, saying Flynn’s “taken the biggest fall” for the President.

And Michael Isikoff on Yahoo! News talks about how if the President fires Mueller, it’ll set off a “cataclysmic….political explosion”.

While Ryan Cooper in The Week has an opinion piece called “How To Crush Trump” that we think is well worth a read because we pretty much believe he’s got it right: all the energy Democrats and Liberals are expending right now obsessing about impeachment is likely to be a total waste. Never mind a “smoking gun”: unless a flaming arrow of invincible proof is headed Trump’s way, it’s highly unlikely. Remember just a week or two ago when most Republicans seemed willing to seat an accused child molester in the Senate? You think they’d think twice about a President who might’ve had a dalliance with Russia? Already more than a handful have adopted Trump’s “Witch Hunt” mantra, or worse

Far better spending time, money and energy getting progressive people into office in 2018 and 2020. And if successful, that probably won’t have much to do with Russia either: more just people getting sick and tired of all the craziness that Trump embodies and also surrounds him.

And that’ll take extra dedication and focus too, because Republicans have been working hard to give themselves an automatic head start at the polls, and they’re likely to work hard to make it even bigger. (According to fivethirtyeight, Democrats will need to win the popular vote by 8 percentage points in the 2018 Congressional elections in order to win half the seats in the House.) A lot will also depend on what the Supreme Court does about landmark gerrymandering cases it’s now considering.



Roy Moore’s Last Ditch Challenge To Block An Election He Lost By 20,000 Votes reporting this morning Moore’s filed an election fraud lawsuit to block the results of the Senate contest which he lost to Democrat Doug Jones, from being certified. As we mentioned earlier this week, that certification’s due to happen at 2PM EST today, barring any delay caused by the new lawsuit.

The document filed very late last night is a hodgepodge. (It’s included in its entirety in the story). It charges that people were bused in from out of state to vote against him, that the percentage of people voting in certain districts was too high, that not enough Republican votes were recorded for him in some areas, and that the results of the election didn’t match up with pre-election polls.

And for some reason it also includes information that Moore took a lie-detector test regarding the validity of sexual misconduct allegations against him, and passed.



Oh, This Is A Really Cool Story…

The New York Times reports that Germany has done such a good job embracing wind and solar energy that there are periods of time now when power prices in the country “go negative”. That means consumers and factories are sometimes paid to use power. That’s because on very windy days turbines produce far more power than usual, and coal and nuclear plans can’t dial back their production quickly enough to compensate.

Could this happen in the U.S.? Not likely. Germany has very strict labor regulations, so factories and offices all tend to be closed at the same time, which is partially why this anomaly is occurring in the first place.



We Made A Mistake…

…when we reported yesterday that according to numbers from the IRS, all of the top 10 states with the highest average charitable contribution voted for Hillary Clinton. We misread the data: while the 10 states with the highest gross income per return all voted for Hillary, they were not the most charitable. The Top 10 states with the highest average charitable contribution split between Trump and Clinton. The state with the #1 average charitable contribution was Utah, which Trump won. Washington, D.C., which Hillary won, would be #2 if it was a state. Our mix-up does not substantially change the point we were trying to make. In fact, Utah being #1 might make our core argument even stronger.  Nevertheless, we apologize for the mistake.