Can you prepay real estate tax before the new law kicks in?

WASHINGTON — Homeowners in the D.C. area with some extra money on hand are hustling to prepay their 2018 property taxes before the new tax law takes effect Jan. 1.

The new federal law caps deductions at $10,000 for all combined state and local taxes, including both income and property taxes. That means owners of expensive homes and cars have only one more chance to avail themselves of healthy deductions.

The prospect of losing that valuable deduction has prompted homeowners to inquire whether they can prepay future property taxes before the limitations of the new law.

Despite the interest, tax experts have not determined that prepayment will benefit all homeowners.

On Wednesday, the IRS released a statement explaining that “whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018.  A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.”

The question of when property tax is assessed is up to “state and local law,” the IRS said.

The City of Fairfax, Virginia, allows prepayment of property tax, but in a statement Wednesday evening, the city government said that the IRS announcement “means that such prepayments of 2018 taxes to the city may not be deductible in 2017 and city officials will immediately review options for refunds as appropriate.”

The laws in other counties and cities in the D.C. area may be structured in such a way that prepayments are deductible; taxpayers will need to contact their tax professionals or county governments.

City of Alexandria

“We’ve always taken prepayments,” said Craig Fifer, spokesman for the City of Alexandria. “What’s new is the level of interest this year.” By Saturday, Fifer said, the city had received more than $1.6 million in prepayments. While payments can be made online, Fifer said the city prefers payments by check, with the word “prepayment” included. Payments can be placed in a drop box at City Hall.

Arlington County

Arlington County will accept prepayments, but reminds taxpayers it’s unclear whether prepayment will be helpful for homeowners. If you have questions about prepaying, email treasurer@arlingtonva.us or call 703-228-3090.

Fairfax County

Fairfax County will accept 2018 real estate and vehicle tax prepayments. According to Scott Sizemore, head of the county’s tax revenue division, payment by ACH or wire transfer is preferred. Checks — with the word “prepayment” in the memo field — can be placed in drop boxes in the county government building, to avoid standing in line. Receipts will be mailed.

Loudoun County

Homeowners in Loudoun County can prepay their 2018 real estate taxes, if they are willing to drive to one of the county’s treasurer offices in Leesburg and Sterling.

Prince William County

Prince William County taxpayers are able to prepay their 2018 taxes, though the county’s Tax Administration Division. A representative said the option to prepay is offered in the online payment system. 

Montgomery County

The Maryland county held a special session Tuesday to pass a bill allowing residents to prepay their 2018 property taxes before the end of the year. Checks and cash are the only acceptable methods of payment this year, and must be postmarked by midnight Dec. 31, or dropped at the county’s Department of Finance, in the Division of Treasury. Submissions must include a Notice of Intent for Prepayment of Levy Year 2018 Taxes. 

Prince George’s County

The County Council had planned to hold an emergency session on Wednesday, Dec. 28 to consider allowing prepaid real estate taxes, but following the statement from the IRS, the Council announced it was cancelling its meeting and would not move forward with any legislation so as not to “add any more confusion” to the tax plan.

Washington, D.C.

The District says taxpayers can prepay online at www.taxpayerservicecenter.com by midnight Dec. 31, or at D.C. branch offices of Wells Fargo Bank. before close of business Saturday, Dec. 30. Homeowners must bring a 2017 real property tax bill to the bank.

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