PROPERTY TAX – PAY NOW OR LATER

PROPERTY TAX PAYMENT – PAY NOW OR LATER? ptax

The standard deduction is jumping A LOT this year.

Here are the standard deductions by tax filing status:

 

2018 Standard Deduction

  • Married Filing Jointly/Surviving Spouse: $24,000
  • Heads of Households: $18,000
  • Single: $12,000
  • Married Filing Separately: $12,000

 

With the new knowledge of the 2018 Standard Deduction, the most common question from our clients today is  “Should we pay our property tax in full before the year end?”

The answer to this is not entirely simple as each client has a different tax scenario.  To assist you with thinking this through, we have listed the 5 main tax situations that might apply to your tax decisions.

  1. If you do not Itemize your deductions AND  you do not pay over $10,000 on your property tax, then it may not make a difference.
  2. If your property tax is over $10,000 in an annual year , then you will have limited deductions beginning in 2018. Making the 2nd property tax payment (due prior to April 10th) before the 2017 year end will allow a full deduction on the 2017 itemized Schedule A as the 2017 year has no deduction limit.
  3. If you pay Property Tax AND if your tax return has liability generated from the AMT (Alternative Minimum Tax) then, it may actually benefit you to pay the Property Tax 2nd installment in 2018 as there may be a deduction available based on the new tax laws. This is due to the new increase in threshold for paying AMT tax.
  4. If you utilize Schedule A Itemized Deductions,  your Property Tax payment is not over $10,000, AND  your total deductions are under the New 2018 Standard Deduction, then you may choose to pay the Property Tax 2nd Installment during the 2017 year as it can apply to raise your Itemized Deductions for 2017 plus you can then use the larger Standard Deductions in 2018.
  5. If you generally Itemize your Deductions AND your current level of deductions is over the New 2018 Standard Deduction, then it may be beneficial to make the Property Tax 2nd Installment during 2017 due to the lowering of the tax bracket in 2018. However, it will only be a minimal effect and you may choose it to not be worth it compared to the ability to pull together the funds needed to make the payment.

Hopefully this will help you as you choose your tax wise decision.

Best wishes for a Healthy and Prosperous  New Year!!

Steven Z. Freeman, CPA and the staff at Freeman and Associates provide Business Services, Tax Planning, Entity Formation,  and Accounting and can assist you with these services. If you have any questions on this matter, or to schedule an initial consultation, Please call us at (805) 495-4211.

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