With just a few days left in the calendar year, new tax rules are set to be passed by Congress and begin in 2018. Some of these rules will be deleterious to those who choose to itemize deductions: while the standard deduction will increase, a new cap on certain types of deductions will soon be in place.
Under the 2017 tax code, all property and state income taxes are federally deductible. Under the 2018 plan, these taxes will be deductible up to $10,000 per tax return — the same threshold applies to single and joint filers.
Therefore, waiting until 2018 to pay 2017 property taxes and state and local income taxes means you will need to conform to the 2018 limitations when you pay 2018 taxes (since you made the 2017 tax payments in 2018). But those who pay 2017 property taxes before the 2018 tax rules go into effect will essentially free up room against the new $10,000 limit in deductible property and income taxes, making the most of your 2018 deductions.
Further, real estate professionals who make quarterly tax payments to the Internal Revenue Service (IRS) ought to make their fourth quarter tax payment before January 1 to stretch their 2018 deductions.
Of note: you cannot pay your 2018 tax liability in advance to avoid the new rules. But you can pay some of your 2017 tax liability before the new rules take effect.