28 Dec Property Taxes & the Tax Cuts and Jobs Acts of 2017
With the passage of the Tax Cuts and Jobs Act in December 2017, we have received numerous phone calls and emails related to the new rules regarding a limitation of property taxes and state income taxes. One item that has not been affected by the new $10,000 limitation is business property taxes. If the personal property taxes, real estate taxes and sales taxes are related to a business, those tax payments are fully deductible against business income. A business includes rental real estate activities.
The limitation for the $10,000 property tax and income tax is associated with personal income taxes and property taxes paid on personal residences and second homes on Schedule A (Itemized Deductions). The Tax Cuts and Jobs Act included a provision that disallowed prepaying your 2018 state income taxes. The IRS has also just released additional guidance regarding prepayment of property taxes. For the property taxes to be deductible in 2017 the property taxes must have been assessed, meaning a payment to the county auditor or treasurer’s office will not be deductible unless the taxes have been billed or assessed.