28 Dec Prepaying Your 2017 Real Estate Taxes
Should you consider Prepaying Your 2017 Real Estate Taxes? Since I own an income tax preparation business I will give you my opinion. We are still trying to figure this out for all of our clients but this is the most frequently asked question. Even the tax experts are still researching this. This is a personal opinion and should not be construed as professional advice. Consult your attorney or tax professional for further clarification sometime around the end of January when the IRS lets us know what the rules are for 2017.
The 2017 Illinois real estate taxes are not yet finalized
The amount owed will not be determined until all of the multipliers and tax districts are finalized. As such your real estate tax bill is accrued but not yet incurred. With extreme prejudice I doubt you can make this deduction. In simpler terms you don’t owe the taxes yet. When Prepaying you are in effect placing the funds for the tax payment in escrow with the local tax authority until the bill is due.
You could sign a 5 year lease and pay it all in up front. However, current IRS guidelines require you to amortize the expense over the life of the lease. There may be exceptions to the rule due to special taxing districts but this is the general outcome.
You amortize the cost of a rental dwelling over 27.5 years. It cannot be deducted in the year of purchase.
Since Illinois is broke they would love your interest free early real estate tax contribution. However, the influx of cash may be just the excuse Madigan needs to go on another spending rampage. Driving even more wage earners out of the state.
Did you even itemize?
Unless your itemized Schedule A deductions for 2016 were well in excess of $24,000.00 it won’t do any good anyway. The tax deductions for your personal residence are only deductible on schedule A
If you did not itemize on Schedule A you have no business considering Prepaying as a course of action in the first place.