NEW YORK (CBS) – Many people are rushing to prepay next year’s property taxes to take advantage of a deduction before it changes in the new federal tax law.
Starting January 1, 2018, state and local tax deductions will be capped at $10,000.
The IRS says some homeowners who prepay their property taxes can avoid that limit, but it will depend on when your property is assessed.
So what should you do?
“The first thing is pull last year’s tax returns out so you have a reference,” CBS News Business Analyst Jill Schlesinger said on CBS This Morning Thursday.
“Your big question is – will I be an itemizer next year or will I claim that nearly doubled standard deduction, $12,000 as an individual, $24,000 as a couple.”
“If you are going to be an itemizer next year,” Schlesinger said, “then you look and say o.k., now am I actually looking at those deductions totaling more than $10,000 total? Again, it’s state and local income tax as well as your property tax. Now that doesn’t leave a ton of people, but there are some high tax states where you might fall into that.”
“If that’s all the case and you want to say, ‘Hey, let me prepay that’, remember that number one – prepaying it may thrust you into this Alternative Minimum Tax scenario where you might not actually see the benefit. Number two – yesterday the IRS released a new warning which said that property tax had better been assessed and billed for you to prepay it,” Schlesinger said.