NICE TRY: IRS Shoots Down Bid For Most Rushing To Prepay 2018 Property Taxes

John Matthews
WMAL.com

ROCKVILLE, MD — (WMAL) So the Montgomery County Council came back from holiday break for naught?

A day after Montgomery County’s lawmakers met in special session to pass an ordinance allowing residents to prepay their 2018 property taxes – and a day before Prince George’s County lawmakers were set to follow suit – the Internal Revenue Service issued guidance that would appear to shoot down most taxpayers’ well-intentioned moves to save on next year’s taxes.

Many taxpayers had rushed to pre-pay their 2018 property tax bills because the new federal tax law taking effect January 1st will put a $10,000 cap on exemptions from state and local taxes. The thought was that paying property taxes in 2017 would allow homeowners to avert the cap, but the IRS said homeowners who pay real estate taxes early will only be able to claim the additional deduction if their property tax is assessed, billed and paid in 2017.

The IRS said Wednesday that people can’t guess at what next year’s assessment might be, pay that amount ahead of time and still get the deduction.

Most local jurisdictions have not yet issued assessments for 2018 property tax bills. Virginia, for example, doesn’t typically prepare tax bills until February, so it appears the rush was all for naught.

The IRS announcement prompted Prince George’s County to cancel its special session on Thursday, and prompted other lawmakers to spead the bad news via social media.

Turns out MoCo property tax prepayments are not deductible after all, under guidance issued today by IRS: https://t.co/kkyic4jvfY

— George Leventhal (@georgeleventhal) December 27, 2017

The rush to pre-pay property taxes prompted thousands of homeowners across the DC area to spend their holiday breaks standing in lines to pay their tax bills in person.

If there’s a silver lining, it’s that homeowners can now take the time to work with their accountants and figure out how the new tax reform law will impact them personally.

“You have to go back to square one, go through your personal income, evaluate how much your taxes are, how much you’re going to be able to write off on your mortgage, and figure out whether at the end of the year whether you’ll be paying more or paying less tax,” says local Realtor Eric Stewart, host of the Pointing You Home program, heard Sundays on WMAL. Stewart says the federal Alternative Minimum Tax may also be a factor for some homeowners in calculating the best way to pay state and local taxes.

Of course, that would require a conversation between homeowners and their accountants – a feat that can be quite a challenge during the holidays.

“I gotta tell you – I’ve been trying to reach my accountant for the past 48 hours with no luck,” says Stewart. “I can’t get some of my own basic questions answered.”