Thursday, December 21, 2017

Tax-a-palooza



Good news, everybody! You can pay your property taxes early!

The final version of the tax bill just approved by Congress makes some significant changes to deductions you can take from your income, which may either (a) limit how much of your state and local income, sales and property taxes are deductible, or (b) make your standard deduction large enough that you won’t benefit from itemizing for 2018. (Or possibly both!)

But there is no new limit on how much you can deduct related to state and local taxes for 2017 (that's this year, you know, the one ending in just a few days!). And while prepaying your 2018 income taxes is not permitted under the new bill, there appears to be no such prohibition on prepaying your property taxes and claiming an unlimited maximum deduction in 2017 for taxes due in 2018 but paid in 2017.  If in the past you have usually itemized deductions on your taxes, there is a good chance you can claim a tax savings, but you have to act fast: to do so you will probably need to actually pay the tax before the end of December 2017.  Our helpful Cook County Treasurer actually saw this coming months ago (good job, Ms Pappas!) and has streamlined the process to make this payment early.  Find details on her website at https://www.cookcountytreasurer.com.

If you're unsure about whether this will benefit you, talk to a tax professional, and probably soon, because they are likely to be very very busy next week.  There's a lot of ways this might not work for you (e.g. the money is stuck in a mortgage escrow account, you'll be subject to AMT, you don't itemize already, and I'm sure many more...) but if you file a joint tax return with your spouse, own your home, and have a middle-class level income, there's a good chance you can benefit from this very special one-time-only tax loophole that's not just for one-percenters.

Also, for a probably much smaller slice of blog readers: if you make estimated income tax payments to Illinois, the 4th quarter payment is due Jan 15th, but if you pay it by Dec 31 you can deduct that in 2017 too!

Happy New Year!