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Reader says the ruling is not clear on whether 2018 taxes will be allowed to be deducted in 2017…

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Also the ruling is not clear on whether 2018 taxes will be allowed to be deducted in 2017…

ONE INTERPRETATION:
https://www.millarlawoffices.com/warning-pre-paid-state-local-taxes-not-deductible-2017-due-2018/
Warning!!! Pre-paid State and Local Taxes are NOT DEDUCTIBLE in 2017 If they are due in 2018!
By of MillarLaw A Professional Corporation On Sunday, December 17, 2017

Assuming that the Tax Cuts and Jobs Act (“TCJA”) passes both Houses of Congress and is signed by the president, there will be monumental changes in the Internal Revenue Code on the individual and corporate tax levels.
One example is the limitation on the part of individuals to deduct state and local taxes (“SALT”). Prior to the TCJA an individual (including joint return filers) who itemized could deduct state and local taxes to the extent they exceeded to two percent (2%) of Adjusted Gross Income (“AGI”). Under the TCJA an individual is limited to a combined deduction of $5,000 ($10,000 per couple).
Tax advisers have been suggesting that individual taxpayers pre-pay their SALT liabilities for 2018 to overcome the limitation. However, the there is language in the TCJA anticipates and neutralizes that suggestion,
“…an individual may not claim an itemized deduction in 2017 on a pre-payment of income tax for a future taxable year in order to avoid the dollar limitation applicable for taxable years beginning after 2017.” (TCJA, p 558)
Therefore, if you may want to reconsider the suggestion to pre-pay your 2018 SALT liabilities.
Planning note: the TCJA is extremely complex and it requires a lot of careful analysis before meaningful planning steps can be recommended. Please have patience with us and other professionals as we all struggle through the legislation and work toward viable solutions.

ANOTHER OPINION:
https://www.360financialliteracy.org/Topics/Taxes/Credits-Deductions/If-I-prepay-next-year-s-taxes-this-year-can-I-deduct-them-this-year

If I prepay next year’s taxes this year, can I deduct them this year?
Probably. Generally speaking, taxes are deductible in the year you pay them.
Sometimes real estate taxes are prepaid. If you are the property owner, you can generally deduct prepaid real estate taxes in the year of the prepayment if (1) you are a cash basis taxpayer and (2) you don’t live in a jurisdiction where the taxing authority considers prepayment a “deposit.” Jurisdictions vary regarding how they treat prepaid tax. Be aware that taxes placed in escrow generally aren’t deductible until they are paid to the taxing authority.
*As of 12/15/2017, updates to come in 2018.

Real estate taxes are not always entirely deductible. If you are subject to AMT the deduction may be limited.
There is a good chance that if you can afford to pay Ridgewood real estate taxes, combined with sky high NJ income taxes, you may be subject to AM

 

 

One thought on “Reader says the ruling is not clear on whether 2018 taxes will be allowed to be deducted in 2017…

  1. Cruelty piled upon cruelty to stick that section in there. Ugh. It would only have counted toward one quarterly payment for one year. But no–revenue will be needed to balance the shortfall when the billionaires gleefully take their tax cuts.

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