Update as of December 28th 2017:
Yesterday the IRS advised:
“In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.”
In the Montgomery County instructions they advised us to use the 2017 assessment (bill) for the pre-payment. However I understand that Montgomery County does not intend to provide 2018 property assessments until July 2018 in accordance with their fiscal year. Thus, taxpayers may not be able to use the pre-payment of 2018 as a deduction on 2017 taxes.
We can no longer make a recommendation about whether prepaying your 2018 property taxes is a good idea for jurisdictions where an assessment has not been made prior to 2018. This probably can be filed under "nice try."
Original post:
As part of the new tax laws effective starting January 1, 2018, many of the itemized deductions previously available on the schedule A of the Federal 1040 have been limited or eliminated.
One limitation is that the deduction of the combined amount of local property tax on your real estate, personal property taxes, plus your state and local income taxes or sales taxes, and other miscellaneous state and local taxes may not exceed $10,000.
Currently, there was no limit to the amount. For many taxpayers with large taxable incomes and or property values for which their taxes are high, the opportunity to deduct the full amount ends on December 31.
Take a look at your 2016 tax return to see whether that amount exceeded $10,000. If so, then it might make sense to pay some or all of your property tax by the end of this week. One caveat is that if you are subject to the alternative minimum tax, your ability to deduct state and local taxes already had been limited by the AMT anyway.
Therefore, look on the second page of your 1040 to see if you paid alternative minimum tax in 2016. If so, it's possible that you would not be gaining any tax deduction benefits by prepaying your property tax early anyway.
In addition, if your deductions in 2016 (and especially your deductions in 2017), don't exceed the standard deduction of $12,000 for a single filer and $24,000 for joint filers, then there's also no benefit to prepaying your 2018 property taxes as you likely would not be itemizing your deductions in 2018 any way.
Being an optimist and running out of time to carefully review every tax planning opportunity, I will be prepaying my Montgomery County Maryland property tax as soon as the website has been updated to reflect that the County Council voted at noon today (December 26) to allow prepayment of property taxes.
Below is the link to the Montgomery County Maryland property tax website.
https://apps.montgomerycountymd.gov/realpropertytax/
Type in your street address but without the suffix (drive, ave, etc) and your account should pull up. Click on the account number, which is a hyperlink to your bill. If you see a green box with the word VIEW you might even have some residual 2017 property tax bill that you could pay immediately as well.
To pay your 2017 property tax bill from this website, you can use either a credit card (2.5% convenience fee) or you can input your name, name of your bank, bank routing number, bank account number, and your email address and pay via electronic check.
The county requires that you mail in a check to the specific address that they list on the site along with a notice of intent. See the checklist that they provide on the website for specific instructions.
Best wishes in maximizing your tax planning opportunities in the last few days of 2017.
We are available this week if you have any questions on last minute tax planning.