IRS release on prepayment of property taxes | KPMG | GLOBAL
close
Share with your friends

IRS release on pre-paying 2018 state and local property taxes

Deductions of U.S. property taxes in 2017

The IRS issued a release stating that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.

1000

Related content

According to the IRS release (IR-2017-210), a deduction for the pre-payment 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. 

The IRS release explains that a pre-payment of anticipated real property taxes that have not been assessed prior to 2018 is 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.

The IRS provided two examples to illustrate its position.

  • In the first example, a county assesses property tax on July 1, 2017, for the period July 1, 2017 - June 30, 2018. On July 31, 2017, the county sends notices to residents notifying them of the assessment and billing the property tax in two installments, with the first installment due September 30, 2017, and the second installment due January 31, 2018.  If the taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on December 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.
  • In the second example, the county also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 - June 30, 2018. The county intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019. However, because county residents wish to pre-pay their 2018-2019 property taxes in 2017, the county has revised its computer systems to accept pre-payment of property taxes for the 2018-2019 property tax year. Those taxpayers who pre-pay their 2018-2019 property taxes in 2017 will not be allowed to deduct the pre-payment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

<p>© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.</p> <p>KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.</p>

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit