Author Topic: Pay your 2nd half property taxes this month for tax savings (Congress tax plan)  (Read 3747 times)

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Offline paperboyNC

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If, like me, you have more than $10k in combined property tax and income tax deductions, pay April's bill this month. For example:

April 2017 payment: $5k
Dec 2017 payment: $5k
Dec 2017 bonus payment: $5k

Extra $5k deduction this year that you'd completely lose next year.

Offline OCLuvr

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Offline Perspective

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Good idea, but fully evaluate before doing this. If you're in the AMT, you're subject to the AMT rates while losing your ability to deduct property taxes. Whether you'd benefit from paying property taxes early in 2017, is highly contextual.

Offline USCTrojanCPA

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Good idea, but fully evaluate before doing this. If you're in the AMT, you're subject to the AMT rates while losing your ability to deduct property taxes. Whether you'd benefit from paying property taxes early in 2017, is highly contextual.

Yup, many of my clients and myself get fully phased out of the state and property tax deductions via AMT so it's not even worth it.  I'm better offer just doing what I've been doing because I'll at least get a $10k deduction for SALT now (I think, not sure if I'll hit the new AMT limits).
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Offline paperboyNC

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Can you do that?

https://www.nytimes.com/2017/12/15/us/politics/republican-tax-bill.html

Linked article references prepaying 2018 income taxes. These are property taxes. Almost, you wouldn't be prepaying imo since it's part of your 2017 bill.

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Offline woodburyowner

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Calculating AMT is not so straight forward.  You're better off just paying the 2nd payment for 2017 property tax now and then figuring it out later.  You won't get any deduction for 2018 anyway (assuming that you have > $10k worth of state income + half another property tax payment) and there could be a chance you actually benefit if you don't hit AMT.

Offline aquabliss

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Can you do that?

https://www.nytimes.com/2017/12/15/us/politics/republican-tax-bill.html

Linked article references prepaying 2018 income taxes. These are property taxes. Almost, you wouldn't be prepaying imo since it's part of your 2017 bill.

Good catch.  I read this first as property taxes as well.

Offline i1

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Can you do that?

https://www.nytimes.com/2017/12/15/us/politics/republican-tax-bill.html

Linked article references prepaying 2018 income taxes. These are property taxes. Almost, you wouldn't be prepaying imo since it's part of your 2017 bill.
Another article along the same lines...
http://www.sacbee.com/news/politics-government/capitol-alert/article188873719.html
CA45 Rep Mimi Walters
DC: 202-225-5611, Irvine: 949-263-8703
https://projects.fivethirtyeight.com/congress-trump-score/mimi-walters/

Offline OCLuvr

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Another source saying the same thing--property tax should be okay.
https://taxfoundation.org/prepaying-state-and-local-tax-deduction-conference-report/

Offline Perspective

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Calculating AMT is not so straight forward.  You're better off just paying the 2nd payment for 2017 property tax now and then figuring it out later.  You won't get any deduction for 2018 anyway (assuming that you have > $10k worth of state income + half another property tax payment) and there could be a chance you actually benefit if you don't hit AMT.

I think this is good advice. My prior comment was based on an understanding that the AMT was being eliminated. It is not in this tax shift bill. The exemption is increasing nominally.

So, should this tax shift bill pass, and you've been hit by the AMT marginally in prior years, and expect 2018 income to be similar, then prepaying April's payment should benefit you.

However, if you're deep into the AMT for thousands, tens of thousands, every year, prepaying your April property tax payment before Jan 1st won't make any difference whatsoever.

Offline firsttimehomebuyer

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could someone please answer these questions

 Do we have AMT for 2018 ?

for 2017 at what gross modified Annual Income  does AMT makes property and state taxes non-deductible ?

Offline woodburyowner

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could someone please answer these questions

 Do we have AMT for 2018 ?

for 2017 at what gross modified Annual Income  does AMT makes property and state taxes non-deductible ?

AMT is in tax plan for 2018 (increased limits).  Your 2nd question is a difficult one as calculating AMT is not straight forward.  Try to play with online calculators.

Offline Perspective

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In a perverse kind of way, by limiting your SALT deductions to $10K, the GOP could be pulling many out of the AMT, assuming the rate & bracket changes fail to significantly offset the SALT change. In other words, your regular income tax might increase sufficiently so that it exceeds your AMT calc, and therefore you'll owe no AMT.

Offline Perspective

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Reading more details, assuming this bill becomes law, and while the AMT exemption amounts increase only nominally, the exemption phaseout amounts increase dramatically - from $160,900 (married) to $1M. That should allow more folks to avoid the AMT, at least until the individual tax cuts expire.

But remember, there is an AMT credit (MTC). Most folks in the AMT, are in it year after year. Sometimes you'll hit it one year by exercising stock options, but not hit it in following years. in those subsequent years, you can use the MTC to offset regular income tax.

By not eliminating the AMT altogether, the MTC is preserved. If you've been paying the AMT for years, and the new tax law pulls you out of the AMT, the MTC may further lower your federal income tax bill in future years.

So much for "tax simplification" and "tax reform," eh?

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Offline Perspective

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Ran some numbers in a spreadsheet, applying 2016's tax figures to the imminent 2018 tax rules. Even though rates are reduced slightly, and brackets are increased slightly, because my Itemized Deductions are cut in half, my 2016 federal income tax* total increases ~$1K (*before any AMT is added).

However, because the AMT Exemption phaseout is increased to $1M (married), the additional $16K+ we paid in 2016 in AMT doesn't apply. That results in a net federal income tax difference of ~$15K. This calc also assumes the $2K child tax credit isn't phased-out. These phaseout figures were also increased.

Anyone else running numbers?
« Last Edit: December 19, 2017, 03:04:52 PM by Perspective »

 

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