CLEVELAND, OH (WOIO) - With just a few days left in 2017 some homeowners are wondering if they should try to pay 2018 property taxes early before the new tax reform rules take effect.
One of the tax rules that's been changed is how much of your property taxes you can deduct.
Currently there is no cap, but starting in 2018 there will be a cap of $10,000 if you itemize your taxes.
So should you, if you are financially able, try to pay 2018 early so that you can deduct them all on your 2017 taxes?
According to CPA William Pappas of Westlake, it might make sense.
"This works for Real Estate Taxes only, not State and/or Local Taxes," Pappas said. "The way I read the new law, taxes shall be treated as being paid on the last day of the tax year for which such taxes are imposed. Because in Ohio, we pay property taxes in arrears, in other words, we pay our 2017 taxes during the 2018 calendar year, prepaying them would be wise."
This doesn't work for everyone.
The standard deduction has been raised so high in the new tax reform, a lot of people will be better off not taking deductions, like property taxes, and simply taking the standard deductions, according to Pappas.
In Ohio your first tax payments due in 2018 are for the last taxes own in 2017 so paying these now would be beneficial.
"Our ordinary payment in 2018 is actually for a 2017 tax, so prepaying in 2017 would be deductible," Pappas said.
Here's a breakdown of who could benefit from paying the taxes early, based on your income and if your property taxes are higher than $10,000.
- $100,000-$150,000 Prepaying property tax would more than likely be beneficial.
- $150,000-$200,000 Prepaying property tax would more than likely be beneficial.
- $200,000-$500,000 For most in this bracket, prepaying would not be beneficial as the likelihood of them being subject to Alternative Minimum Tax is high, making tax prepayement nonbeneficial.
- $500,000- +++ Prepaying property tax would more than likely be beneficial, especially for those with adjusted gross income greater than $700,000.00
The bottom line according to Pappas is that for most people who are faced with this situation, would benefit from trying to prepay some taxes before the end of Dec. 31.
You will want to check with your local county tax office to make sure they will accept prepayment of 2018 property taxes.