Unfortunately, you cant pre-pay SALT anymore
Congress has and is now heading to President Donald Trump's desk for a signature to enact it.
For taxpayers who itemize their deductions, that could mean an increased tax bill in 2019. But there are some things you can do now to prepare for the changes, including maximizing your 2019 tax deductions.
Under current tax law, you can deduct taxes paid to state and local governments, including property, income, and sales tax. But the final GOP bill — the product of a compromise committee to reconcile differences in the House and Senate versions passed in those chambers — caps the deduction at ,000, either for property taxes, state and local income taxes, or sales tax.
Homeowners whose property tax bill is more than ,000 — and not subject to the alternative minimum tax — could save more money by paying next year's bill by December 31 if their local government takes it.
That way, you can get the deduction for that payment when you file your 2019 taxes— especially useful for homeowners in states with relatively high taxes, like New York, New Jersey, and California.
Deducting the full amount of your current property tax bill in 2019 might provide an even larger tax benefit if your tax rate goes down next year under the new plan, according to the experts at TaxAudit, an audit defense service.
What are property taxes?
Property taxes are just that: taxes you pay on your property.
There are two kinds of property taxes, depending on the property's mobility:
- The real estate tax: for property that can't be moved, such as a house or land.
- The personal property tax: for property that can be moved, such as an RV or a plane.
To get the property tax deduction, you have to itemize your deductions.
How do I pay property taxes?
Property taxes are administered on a local level, so to pay early, you'll have to check with your county to see how to do so.
For example, the New York City Department of Finance's page on property taxes explains how residents can pay electronically, by mail, or in person at any of its business centers.
But keep in mind that if you own a home, your mortgage lender might pay your property taxes from an escrow account.
Unfortunately, you can't pre-pay SALT anymore
We originally suggested that it might be worth it for some taxpayers to prepay their 2019 state and local income tax liability this year to maximize that deduction as well.
But that's no longer possible: the new bill says that state and local income taxes paid for any tax year beginning in 2019 will not be deductible on your 2019 taxes.
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