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The Internal Revenue Service has spelled out the conditions under which prepaying 2018 property taxes can be deductible for 2017 returns. The IRS said it has received questions about deductibility as taxpayers attempt to avoid caps for writing off state and local levies under the new tax law.

The agency said taxes must have been assessed in 2017 in order to qualify prepayment as deductible. It notes state and local law determines when a tax has been assessed, which is usually when the taxpayer becomes liable for the tax.

In one scenario, a taxpayer has been assessed property taxes on July 1, 2017, billed in two installments with the second due on Jan. 31, 2018. It the first installment has been paid in 2017, the second is deductible on 2017 returns if paid by the end of this year.

However, under another scenario, a county has revised its computer systems to accept prepayment for 2018-2019 property taxes. Prepayment of those taxes would not be deductible since the taxes would not be assessable until July 1, 2018.

Last modified on Friday, 29 December 2017
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