The IRS warns homeowners that prepaying property taxes this year could be a waste of time
- The IRS clarified on Wednesday who is allowed to prepay their property taxes this year before the new GOP tax law takes effect Monday.
- Only homeowners with property taxes that have already been assessed can take advantage of the unlimited state and local tax deduction.
- The new law caps that deduction at $10,000.
The IRS issued an advisory notice on Wednesday, warning taxpayers that attempting to prepay property taxes before the end of the year will only work "under certain circumstances."
Only homeowners whose property taxes have been assessed in 2017 are allowed to prepay next year's taxes, the IRS said.
Property tax assessments usually occur annually to determine the value of a person's property, which is then used to calculate how much that person will pay in taxes.
Municipalities around the US this week have seen a surge in homeowners prepaying their property taxes as they brace for a major change in deductions from the Republican tax law that will take effect Monday.
The new law caps state and local tax deductions at $10,000. High-income individuals who itemize their deductions in mostly high-tax states like New York, New Jersey, and California will be affected. Currently, beneficiaries of the deduction enjoy no limit, but that will soon change.
Homeowners whose property taxes are more than $10,000 - and not subject to the alternative minimum tax - could save money by paying next year's property tax bill by Sunday, the day before the new law takes effect, if their local government takes it.
For those able to claim the deduction when filing their 2017 taxes, the savings will be worth the effort.
But as homeowners rushed to cash in on the loophole in the days after President Donald Trump signed the GOP tax bill into law, confusion ensued.
Fairfax County in Virginia, for example, collected nearly $16 million in tax prepayments on Tuesday, according to The Washington Post. After the IRS announcement, officials in that county might now have to devise a reimbursement plan to return money that isn't eligible for early payment.
"We don't know the full impact of that [IRS] statement yet," county spokesman Jeremy Lasich told The Post. "We're still studying that."