INDIANAPOLIS, Ind. — The IRS issued a warning on Wednesday to those thinking about paying their property taxes early.
A provision in the new tax code overhaul signed by President Trump caps deductions for state and local taxes at $10,000. People looking to take advantage of the current deductions have been rushing to pay their 2018 property taxes ahead of time. Financial experts and the IRS are now saying that making the early payments may not yield the benefits some are looking for.
Financial experts like WestPoint Financials’ Scott Eckhart say the tax overhaul and caps would more severely affect higher tax states like New York and California, but would have far less of an effect on states like Indiana.
“And we always want to avoid a knee jerk reaction to something that’s coming down the line,” he said. “Let’s say you’re at a party here at the end of the year, and somebody says oh you need to do this because the tax code says this, well be very careful not to fall in the trap of one size fits all.”
On Wednesday, the IRS clarified matters by issuing a warning that in part says filers could only take advantage of the current tax code and avoid the cap if they pay property taxes that have been assessed in 2017.
Eckhart says the warning only emphasizes the importance of making these type decisions with someone who is familiar with your specific financial situation.
“But it’s also a cash flow issue, here we are at the end of the year with Christmas and other things you want to do and just because somebody says to prepay a tax you may not have the cash flow to do that. So, it really comes down to what’s best for you and your family,” he said.
Eckart says there are some things Hoosiers can do before the year ends to maximize deductions. He says adding money to a 529 tax-advantaged savings plan, or increasing charitable donations will both yield solid tax credits. However, he warns, those contributions have to be done before 2017 ends or else they don’t count.
For more tips on year-end financial planning, you can visit here.