Can You Prepay 2018 Property Tax in 2017?

By Victor Thuronyi

This question gets more complex by the day.  On Dec. 27, the IRS issued Announcement 2017-210, which can be found on their website.  https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017  My first reaction to this was, good for the IRS for doing their job to provide guidance to taxpayers.  But there is a caveat.  The job of the IRS is not easy because it is subject to political constraints (the acting IRS Commissioner, David Kautter, also serves as Assistant Treasury Secretary for Tax Policy).  It is unusual for the Assistant Secretary to also serve as acting IRS Commissioner – indeed this has never happened before, at least in recent memory – and it raises questions precisely about issues like the one about the state and local deduction – does the IRS announcement reflect a nonpolitical view or is it designed to serve the political purposes of the Trump administration?).

Those who are not aficionados of IRS documents may not focus on the fact that the IRS Announcement is not a Revenue Ruling, which would carry some legal status.  An Announcement generally does not break new legal ground.  The Accouncement states: “ A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.” (this is also ungrammatical, by the way). One would expect an Announcement that states a legal conclusion to provide a citation with legal authority, but the Announcement does not do so.

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Mortgage Interest Deduction

By: David J. Herzig

The Trump and Republican tax plans have circled around the idea of repealing the mortgage interest deduction.  Although I’m not convinced it will happen (see e.g., Treasury Secretary Mnuchin’s remarks).  The mere threat of the repeal has garnered a fair amount of attention.

For example, the other day this chart was making its rounds on twitter.

Screen Shot 2017-06-16 at 7.42.50 AM

I have not verified the methodology of the chart or the data.  I interpret that the chart examines (in absolute numbers) how many mortgages exist at $1,000,000. The implicit conclusion of the chart is that homeowners in states like D.C., Hawai’i, California and New York have the most at stake in retaining the deduction.

Why?

Because there seems to be evidence that the mortgage interest deduction contributes to housing inflation.  Back in 2011 the Senate held hearings on incentives for homeownership. [1]  It has been suggested that the elimination of the deduction will drop home prices between 2 and 13% with significant regional differences. [2]  So, if the mortgage interest deduction is eliminated, then the aforementioned states might have numerous problems, including a smaller property tax base.

What exactly is the Mortgage Interest Deduction?

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Regressivity and Cook County Property Taxes

I was listening to “The Morning Shift” on WBEZ this morning, and they started talking about property tax. Now, property tax isn’t really my thing, but the story caught my ear for a couple reasons.

First, of course, I’m a homeowner in Chicago, so the recent property tax hike is salient enough that it’s worth some of my time. Second, as my wife pointed out to me, the assessment of property values has an aspect that seems tremendously regressive and, therefore, problematic. Continue reading “Regressivity and Cook County Property Taxes”