Does Travis allow to prepay property taxes? (Austin, Orange: home, to buy)

[dmat57]

the new bill says that state and local income taxes paid for any tax year beginning in 2018 [u][b]will not be deductible on your 2017 taxes.

"As the Tax Cuts and Jobs Act seeks to simplify the tax code, a last-minute provision closed a potential new tax-planning strategy germinating before the bill even passed," Nicole Kaeding, economist with the Center for State Tax Policy at the Tax Foundation, said in a post.

[Waterwonders]

There are state and local governments all over the country temporarily changing their regulations to allow prepayment of property taxes to take advantage of the tax write off in 2017 , do you think travis country will do the same?
All counties around travis county allow it.
Who would have final say on this? Mayor??

[Kthnry]

I own property in NJ, which has shockingly high property taxes, so people are on top of this question. There is nothing at the federal level to prevent you from prepaying some or all of next year's property taxes and taking the deduction this year. (How did the administration miss this opportunity to further stick it to the blue states?)

Municipalities have the option of allowing it. Most towns in NJ are working overtime to accommodate the collection of prepaid property taxes before the end of the year -- for example, modifying their online tax payment portals to display next year's scheduled payments so people can pay online. People are prepaying in droves.

This does NOT apply to income taxes. Those cannot be prepaid.

Tip: You can also prepay next year's tax preparation service and take the deduction this year. Have your tax guy send you an invoice ASAP. It will not be deductible next year.

[CptnRn]

Originally Posted by Waterwonders

There are state and local governments all over the country temporarily changing their regulations to allow prepayment of property taxes to take advantage of the tax write off in 2017 , do you think travis country will do the same?
All counties around travis county allow it.
Who would have final say on this? Mayor??

I'm curious to see how this will go down, but it appears to me that even if state and local governments all over the country allow the 2018 property taxes to be paid to them in 2017, that does not mean that the IRS will allow those payments to be deducted. After all that would clearly be an attempt to avoid the new tax laws that were passed for 2018, paying taxes that have not even been estimated, have not been billed and are not due, and result in less revenue going into the Fed coffers.

[Trainwreck20]

Yeah, people, talk yourselves blue, but I wouldn't expect much out of it other than a fine for miscalculating your taxes due if you try to claim future taxes on a current return.

[agileafro]

Looks like Travis County updated their website:

Travis County will accept prepayments of 2018 property taxes. Taxes are held in escrow until the 2018 tax bill is calculated in October. To determine if prepayments held in escrow are deductible on your federal income taxes, please contact your financial advisor or the Internal Revenue Service. Click on the Prepay tab below for additional details.

[capnkaos]

> I went to the Travis County website to see if it was possible to pay
> the 2018 property taxes online and it was not possible.

It looks to me like you can. Here's what it says in the "Individual Payments" section of the Payment Options page on Travis County's Tax Office website ([url]https://tax-office.traviscountytx.gov/properties/payment-options):[/url]

To make a 2018 prepayment online:
--Search for your property.
--Add your account to the cart.
--If your 2017 taxes are paid, edit the payment to add the desired amount in the escrow field.
--If your 2017 taxes are due, pay the 2017 taxes first and then add the account to the cart again to pay the 2018 escrow payment.


The language on that page suggests that the payment is made through one's escrow account. That's a bit misleading. Once I put the desired amount in the escrow field (per the third bulleted step above), the site UI took me through the steps for paying the taxes directly.

[Trainwreck20]

Honestly, people, you are probably better off putting the money in the market and making a few percent rather than putting it in escrow and hoping that the IRS says it is deductible. It is HIGHLY unlikely that it will be deductible. I am sure the city/county/school, however, if more than glad to 'manage' your money for a year and make whatever they can off it....

[agileafro]

Originally Posted by Trainwreck20

Honestly, people, you are probably better off putting the money in the market and making a few percent rather than putting it in escrow and hoping that the IRS says it is deductible. It is HIGHLY unlikely that it will be deductible. I am sure the city/county/school, however, if more than glad to 'manage' your money for a year and make whatever they can off it....

If you're confident that it will not be deductible for 2017, then this advice works. However, if it is deductible, you can save way more than you can earn in a money market account (whatever your tax bracket is, to be specific). I believe it will be deductible because this was a valid tax planning strategy before this legislation (pay in January and then again in December, deduct 2 years of property taxes on your return, and then take the standard deduction the following year when property taxes were not paid).

My accountant recommended prepaying if I have the money to do it, which is what I did.

[Trainwreck20]

Originally Posted by agileafro

If you're confident that it will not be deductible for 2017, then this advice works. However, if it is deductible, you can save way more than you can earn in a money market account (whatever your tax bracket is, to be specific). I believe it will be deductible because this was a valid tax planning strategy before this legislation (pay in January and then again in December, deduct 2 years of property taxes on your return, and then take the standard deduction the following year when property taxes were not paid).

My accountant recommended prepaying if I have the money to do it, which is what I did.

That was not paying ahead - we have used this strategy before and it works like:

CY 2015 taxes are billed in Nov 2015, due by the end of Jan 2016.

Property owner opts to pay taxes after Dec 31, 2015 so the actual payment for assessed taxes falls into CY 2016.

CY 2016 taxes are billed in Nov 2016, due by the end of Jan 2017

Property owner opts to pay taxes before Jan 1, 2017 so the actual payment for the assessed taxes falls into CY 2016.

This strategy allows you to 'double up' property taxes into one year, presumably to allow you to itemize that particular year and then claim the standard deduction the year you do not pay any property taxes. It is worth noting that those taxes have been assessed and the home owner has been billed a discrete amount. That money goes immediately into 'general fund' for the city (or county, school, etc) to spend. Putting money in an escrow account against estimated taxes is a completely different thing. Knowing the IRS all to well, they are unlikely to allow that to be deducted UNLESS there is a 'presidential' decree that that should be allowed.

Isn't the tax deduction allowed up to $10k? So this would apply only to taxes above $10k in any case. So, assuming Austin taxes and typical exemptions, you would need to own a $500k house, give or take, to make it worthwhile and only on the differential. So, if your property taxes are $12k, you would need to put all $12k into an escrow account (earning essentially nothing, I guess, but maybe a little?) to 'shield' $2k from taxes one year. If you save 25% of that on your taxes, you would save $500.

I know the market varies, but this year my portfolio is up right around 30% and has returned about 3.5% of the value via dividends. If you put your $12,000 in escrow money in a decent dividend stock (3%), you almost break even on that alone. If your stock goes up a percent or two, then you are ahead of the escrow route. A $20,000 tax bill would stand to save $2500, though, but with $20,000 in escrow instead of the market. In this scenario, you would need to have a significant market jump (~9%) to equal the possible tax savings via early payment; however, the odds of a 9% return on a dividend stock might be just as good as the IRS allowing the 'escrow' deduction .

In any case, the potential advantage to the escrow route is really only for the higher-cost homes (not mine ).