Prepaying Property Taxes May Not Help North Texans After IRS Clarifies Rules
DALLAS (CBS11) - A newly issued advisory by the IRS Wednesday afternoon casts doubt that North Texans will be able to deduct prepayments of next year's property taxes on this year's federal income tax returns.
The ruling comes as some North Texans have scrambled to prepay their 2018 property taxes with the goal of saving money on their income taxes.
The agency's advisory said, "A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017."
In Texas, county tax collectors won't send out property tax bills for 2018 until October 1.
So that means, even if people here in North Texas prepaid their 2018 property taxes, they will not be able to deduct them from this year's federal income taxes.
Under the tax reform law signed by President Donald Trump, property tax deductions will be capped at $10,000 on federal tax returns starting next year.
There is no limit on property tax deductions this year.
The new law has led property owners across the country, and here in North Texas, to ask their tax collectors if they can prepay next year's property taxes.
Here in North Texas, Tarrant County Property Tax Assessor-Collector Ron Wright was among the first to allow residents to prepay their 2018 property taxes, even though they weren't yet assessed.
On Wednesday night, Wright said, "We've reviewed the IRS statement and it clearly says the assessment has to be made prior to the end of 2017. What I'm going to check is what legally constitutes an assessment because I want taxpayers to gain as much of a benefit as they can from the new law. But I don't speak for the IRS."
Tax collectors offices in Dallas, Collin and Denton Counties have also been flooded with calls of people asking if they too can prepay next year's property taxes.
As a result, Dallas County changed its policy last week and allowed its residents to do the same.
Before the IRS issued its advisory, John Ames, the Dallas County Tax Assessor-Collector said, "We've had 450 to 500 inquiries so far from people who want to prepay their taxes. This is really the first time people are wanting to prepay next year's taxes, especially this far in advance."
Denton County's Tax Assessor-Collector Michelle French said Wednesday before the IRS statement, she and the county's tax attorneys had just decided to give their residents the opportunity to prepay next year's property taxes.
Collin County has previously allowed people to prepay the following year's taxes, as long as their current bill was paid.
While the IRS ruling shows there may not be any tax benefit for property owners here in Texas, experts say residents should consult an expert before making any decisions.
If residents are still interested in prepaying next year's property taxes early, Denton County is only allowing it if they make their 2018 payments in person at a tax collector's office by this Friday afternoon.
While residents will be able to make a large payment by Friday, they will still have to enter an escrow contract with Denton County and still make smaller monthly payments next year.
That's not the case for those in Dallas, Tarrant and Collin Counties.
They have until December 31 to make the payments.
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