PSA: Pay Your State Taxes Before 12/31/17 to Benefit From a Federal Deduction

[skyguy918]

Accelerating deductions and deferring income may very well be red flags for an audit - donating to a specific political party has been a red flag in the past.  However, generally there's nothing against the law about what people are discussing here - any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.

Now if you were worried about an audit for other reasons you might consider minimizing any activity that be a flag.

I think most people would like to avoid an audit even if everything is kosher.

[4yourinfo]

I know people are saying you can't lose by prepaying your state taxes- even if the fed decides to not allow you to deduct why not take the chance.... here's a reason why I saw in NJ there is a bill out there that may allow you to deduct your state taxes on your state income taxes...so if you were to prepay your taxes this year and the feds decide you can't deduct that you won't be able to deduct on nj taxes either cause you paid it in 2017....

[Deal Guy]

I know people are saying you can't lose by prepaying your state taxes- even if the fed decides to not allow you to deduct why not take the chance.... here's a reason why I saw in NJ there is a bill out there that may allow you to deduct your state taxes on your state income taxes...so if you were to prepay your taxes this year and the feds decide you can't deduct that you won't be able to deduct on nj taxes either cause you paid it in 2017....

Source?

[Menachem613]

Note the last sentence.

[noturbizniss]

Note the last sentence.

but it applies to tax years starting after 12/31/17. Other years (i.e. 2017 tax year) is not subject to the provision.

[henche]

But see

https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017

[Deal Guy]

But see

https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017

So is the IRS clearly saying that for example in New Jersey, even though Christie signed a executive order to allow you to pay for the entire 2018, you will only be allowed to count the first 2 quarters, since in most municipalities, they only actually 'assessed' the first 2 quarters?

Example 2:  County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018.  County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

[henche]

So is the IRS clearly saying that for example in New Jersey, even though Christie signed a executive order to allow you to pay for the entire 2018, you will only be allowed to count the first 2 quarters, since in most municipalities, they only actually 'assessed' the first 2 quarters?

Example 2:  County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018.  County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

Did NJ not yet assess the next quarter? 

[Deal Guy]

Did NJ not yet assess the next quarter? 

I don't think so.

[4yourinfo]

Source?

http://newyork.cbslocal.com/2017/12/21/n-j-property-tax-deduction/

[noturbizniss]

Did NJ not yet assess the next quarter?

from what i have read, most NJ municipalities have only assessed q1 and q2 of 2018

[Reluctant Lawyer]

What about medical insurance premiums for 2018? Can you prepay 12 months of 2018 health insurance premiums, so that when you itemize in 2017, you will have 2 years (2017-2018) health insurance premiums on your 2017 itemized deductions?

Health insurance premiums are not an itemized deduction so this would not help. Only medical expenses are itemized (above a certain threshold).

[mord1]

Health insurance premiums are not an itemized deduction so this would not help. Only medical expenses are itemized (above a certain threshold).

unless you have a schedule C, then it helps

[Dan]

Still not an itemized deduction.

[mord1]

Still not an itemized deduction.

correct, its better,,  just going with the theory to reduce 2017 income as much as possible will benefit you

[noturbizniss]

correct, its better,,  just going with the theory to reduce 2017 income as much as possible will benefit you

Until u hit amt that is...

[Deal Guy]

Health insurance premiums are not an itemized deduction so this would not help. Only medical expenses are itemized (above a certain threshold).

Of course health insurance premiums that you pay out  of your own pocket are itemized deductions.
What are you guys thinking?

[mord1]

Until u hit amt that is...

ok, fair. IMH I will get there

[noturbizniss]

Of course health insurance premiums that you pay out  of your own pocket are itemized deductions.
What are you guys thinking?

You are correct. They probably were only thinking that they pay them through employer and thus are already pretax.

[henche]

Is it too late?