Home › Forums › Financial Markets/Economics › Prepaying property tax
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gzz.
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December 2, 2017 at 9:27 PM #22471December 2, 2017 at 9:55 PM #808644
scaredyclassic
Participantyeah. what about making next years loan payments in advance. deduct the interest? might be worth making a LOT of payments.
what if you just sent 25000 to ca state as advance payments on tax liab?
December 2, 2017 at 10:04 PM #808645bewildering
ParticipantPrepay interest on the loan? Is that possible? Does that make sense?
EDIT: I googled – I think it is possible to pay your January payment in December to count for 2017. But no other prepayment is allowed.
December 2, 2017 at 10:25 PM #808646henrysd
ParticipantNo much difference unless you have a large property tax bill. Both the passed senate and house bill now have property tax deduction up to $10K. I wouldn’t think the final compromised house and senate bill will drop that as it as it was added last day in senate for Sen. Collins. Dropping it would cause her to cast No voting in final combined bill.
December 2, 2017 at 10:39 PM #808647ParticipantThey are getting rid of both the mortgage interest deduction and the state income tax deduction. And the standard deduction is going up to 24400. In my situation that means I will not be itemizing for 2018 taxes, I’ll take the standard deduction. Therefore I will not be claiming property tax for 2018.
December 3, 2017 at 7:49 AM #808648SK in CV
ParticipantNeither house nor senate bill eliminates home mortgage deduction, though there are some limitations. Those limitations will probably end up only applying to new mortgages. State & local income and property taxes are limited and eliminated. Medical and miscellaneous are eliminated. Accelerating property taxes makes sense, particularly if the increased standard deduction will be more than your actual itemized. If that’s the case, accelerating any charitable contributions also makes sense.
December 3, 2017 at 8:30 AM #808649
CoronitaParticipantI could be wrong about this, but I think awhile ago, i tried to make mortgage payments due the following year in the current tax year, but when I got my statement, only interest paid applicable to the current year was listed. Maybe I am wrong. İt’s been awhile.
Property tax deduction you can pay up front, but if you are subject to AMT, it might not matter since property tax payments don’t count towards AMT tax deduction.
December 3, 2017 at 8:56 AM #808650andymajumder
ParticipantSenate version of the bill preserves mortgage interest deduction up to 1M mortgage and doesn’t change it at all, new buyers are also eligible for that, property tax deduction capped at 10K. While in committee to hammer out the final bill, its possible that the cap could be increased slightly and be used for both income and property tax, house republican members from blue states are trying to do that. Let’s see what the final version comes out as.
December 3, 2017 at 9:06 AM #808651CoronitaParticipantMeanwhile…529 plans possibly extends to K-12 private school and 529 plan eligible for unborn child…..lol…..
December 3, 2017 at 10:17 AM #808653ParticipantThanks all. I was obviously wrong about the mortgage interest deduction.
But I think I will still be taking the standard deduction in 2018. The state income tax deduction is a large part of my itemized deduction. Without the state income tax deduction, I do not think I will reach $24400.
I can prepay my January 1st 2018 mortgage payment. And I think that makes sense.
I have an Escrow account with my loan servicer. If I pay the April property tax this month myself then I assume the servicer will adjust my Escrow payments. I’ll try to call them on Monday to check.
December 3, 2017 at 10:35 AM #808654HLS
Participant[quote=bewildering]
Does anyone know if I can prepay my property taxes due to San Diego in April 2018? I have an escrow account with my loan servicer.[/quote]You definitely can pay it in December.
Send your 2nd half property tax payment directly to the county (not to your loan servicer)(In March/April your loan servicer will send the same payment to the county, it will get returned to them and you will have an overage in your impound acct.
At a future point there will be an overage in your impound acct and it will get refunded to you)As far as prepaying interest, it is tricky because the accounting systems are all automated,
Just because you make your January payment in December,
it isn’t due until January 1st.
The 1099 that loan servicer issues for 2017 interest paid may not reflect your early January payment.SK can confirm, but paying your 2nd half property tax bill is an acceptable deduction for 2017.
December 3, 2017 at 10:44 AM #808655Participant[quote=bewildering]
I can prepay my January 1st 2018 mortgage payment. And I think that makes sense.I have an Escrow account with my loan servicer. If I pay the April property tax this month myself then I assume the servicer will adjust my Escrow payments. I’ll try to call them on Monday to check.[/quote]
I don’t think you are going to get your loan servicer to adjust your impound account payments. Eventually you will get the overage refunded to you.
(You may even get a decent rate of interest on the excess funds in your account) Audits are usually done once a year, on their schedule.Your loan servicer has a specific amount that they expect every month to keep your account current.
You really don’t want to mess with that.You might be able to ask them to remove your impound account if you are willing to pay taxes & Insurance on your own going forward.
Please report back if they tell you that will adjust your payment manually.
December 3, 2017 at 12:52 PM #808658Anonymous
Guest[quote=scaredyclassic]yeah. what about making next years loan payments in advance. deduct the interest? might be worth making a LOT of payments.
what if you just sent 25000 to ca state as advance payments on tax liab?[/quote]
The common sense answer to this would be that the IRS isn’t going to allow deductions for expenses that don’t exist at the time you pay. You can pre-pay your property taxes because they represent an actual liability – you got a bill from the tax collector.
If you sent them more than you owe in order to maintain a positive balance on your account in anticipation of what you may have to pay in the future, I highly doubt the IRS is going to allow that as a deduction. Same idea applies to prepaid interest – you don’t owe interest until you have actually carried a balance on the owed principal.
If any of this were possible, it would be regularly used and abused.
December 3, 2017 at 12:53 PM #808656GuestI’ve often paid the second installment of property taxes in the prior year and taken the deduction. I will certainly do it this year on my primary for the reasons the OP listed. The flexibility is one of the reasons I never use a tax impound.
For rental properties I believe that the changes to limits on property taxes won’t apply, since property taxes on rentals are deducted as a business expense. But I am not able to find any confirmation on this. SK?
December 3, 2017 at 1:48 PM #808659Participantyeah, it was just a thought.
too bad the contract couldnt be altered. no reason the loan servicer would really mind getting interest in advance. and if it could be deducted now, money is being left on the table by paying later.
so if you have the cash on hand and are definitely staying put, why not just amend the loan docs to agree that interest in say years 2-4 will become immediately payable in year 1 of the loan. and not payable in years 2 -4.
youd immediately get a large deduction on the payment. , the lender would get the cash. the gov. would sort of get screwed.
. theres probably therefore a rule,against this. but maybe theres some other creative workaround?
what if you refinanced to a new type of creative loan, one that only needs to exust for current transition period, say a 7 year loan, where you have a balloon payment of all interest immediately and all payments are all principal for next 7 years?
we could call it the emergency tax refi of 2017 loan…
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