Schumer Urges IRS to Reverse Course on Prepaid Taxes

first_imgSen. Charles E. Schumer, D-N.Y., has called on the IRS to reverse course and allow taxpayers to deduct 2018 prepaid property taxes. “The IRS should rescind the recent guidance, which is not supported by the law, and clarify that taxpayers are allowed to deduct their prepaid 2018 property taxes to state and local governments for tax year 2017,” Schumer said.DeductionThe Tax Cuts and Jobs Act (P.L. 115-97) limits annual itemized deductions for all nonbusiness state and local taxes deductions, including property taxes, to $10,000 ($5,000 for a married taxpayer filing a separate return). This treatment, however, is temporary. The old rules come back after 2025.President Trump signed the Act into law on December 22. Many taxpayers attempted to prepay their 2018 state and local property taxes before January 1, 2018. The IRS responded with IR-2017-210. According to the IRS, a taxpayer may deduct prepaid state or local real property taxes in 2017 if:the taxpayer makes the payment in 2017; andthe real property taxes are assessed prior to 2018.Confusion“Taxpayers are confused about this hastily written tax law and need clarity,” Schumer said. “I am calling on the IRS to let New Yorkers who prepaid prior to January 1, 2018 to deduct their property taxes in tax year 2017. The IRS should follow the letter of the law and allow these prepayments to be counted in tax year 2017,” Schumer noted.Allowing the prepayment of property taxes would lessen the damage of the new cap on state and local tax deductions, according to Schumer. “The IRS ought to do the right thing here; it is common sense and fair,” he added.Last week, several other lawmakers asked the IRS to rescind IR-2017-210. According to the lawmakers, the Tax Cuts and Jobs Act is “silent” on the pre-payment of property taxes.State ActionSome states are exploring workarounds of the cap on the deduction going forward. In California, a proposal would permit taxpayers to make charitable donations to the California Excellence Fund and receive a dollar-for-dollar tax credit for their contribution. “The taxpayer would then be able to deduct the contribution from their federal taxes just as they have historically done with their state tax payments,” Kevin de Leon, President Pro Tempore, California State Senate, said.The Treasury Department appears to be aware of these state workarounds. “We will audit the real estate taxes issue,” Treasury Secretary Steven Mnuchin said in Washington, D.C. on January 12.By George L. Yaksick, Jr., Wolters Kluwer News StaffLogin to read more tax news on CCH® AnswerConnect or CCH® Intelliconnect®.Not a subscriber? Sign up for a free trial or contact us for a representative.last_img

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