Prior to 2018, folks have enjoyed big deductions when it comes to owning a home: property taxes for the real estate and mortgage interest. With the 2018 tax law changes settled in and made final, homeowners now have a changing landscape that must be dealt with in 2018. And that means potentially big changes in decisions about a current home, a second home and tax filings.
- First, if a filer was subject to the Alternative Minimum Tax on 2016 taxes, the same is going to apply 2017, so prepaying property taxes just for a deduction in April 2018 is probably a waste of time. That's because the AMT was intended to eliminate the benefit of deductions for higher income ranges, ergo no benefit.
- Second, only those property taxes that were assessed in 2017 are eligible for deduction on 2017 tax filings. 2018 assessed property taxes cannot be deducted, even if prepaid in 2017.
- Third, up to $10,000 of property taxes can still be deducted in 2018. So there is still a substantial tax benefit left post-change for most taxpayers. However, those with enough property to exceed this cap, especially with two properties in a potential purchase, may want to give some extra consideration to the lost tax benefit in 2018 if it makes a difference in a specific situation. This benefit is no good, however, if one paid the 2018 property taxes in 2017 and lost the payment timing matched to the right year of deduction.
To be sure of your specific situation, always consult with a certified tax preparer or licensed tax attorney. The above is only general information and should not be relied upon for tax guidance or legal advice. We are fully aware of the changes that will take place on the tax reform. Don't miss your opportunity to take advantage of certain deductions, contact Travis W. Watkins Tax Resolution and Accounting Firm for your FREE consultation at 800-721-7054.
Stay tuned for our next article on how workplace expenses are impacted by the 2018 tax law changes! It's far reaching on deductions people have assumed for years.