Deductability of Prepaid Real Estate Taxes Under New Law

Nick HopkinsBy Nick Hopkins, CPA, CFP®
Partner, Director of Tax Services

Under the recently passed tax law, individual taxpayers are limited to a maximum of $10,000 for the amount of combined state and local income tax, property tax and sales tax (if elected) claimed as an itemized deduction for tax years beginning after December 31, 2017.

As a result of these changes, many taxpayers have asked if they can prepay their 2018 real estate property taxes before December 31, 2017, in order to claim the amount as an itemized deduction on their 2017 federal individual income tax return.

In response, yesterday the IRS has issued an advisory: click here to read it.

In general, the IRS states that a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 if 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.

Please be aware of one important caveat: Individual taxpayers who will pay alternative minimum tax (AMT) on their 2017 federal individual income tax return will most likely receive no benefit by prepaying their 2018 real estate taxes in 2017.

If you have any questions about real estate deductions, please call Nick Hopkins at (317) 608-6695 or email

Comments are closed.

Popular Tags