Last Minute Tax Planning For Maryland Residents (and others)

Recognizing the tax planning opportunity, my local tax authority (Montgomery County, MD) passed legislation this morning which allows residents to “prepay” their 2018 real estate property taxes before December 31.  Those prepayments should be fully deductible for 2017, whereas timely payments of the real estate taxes as they come due during 2018 will (effectively) not be deductible for 2018.  To illustrate the point with an oversimplified example, assume that your annual property tax bill is $10,000, you itemize, and you are in the 35% tax bracket.  A prepayment before December 31 of the $10,000 property tax for 2018 will provide you with an additional $10,000 in deductions in 2017 and will reduce your 2017 tax liability by $3500 without changing your 2018 tax liability.  Think of it as the “tax cut” the federal government never meant to give you.

Of course, you will need to check your local tax authority’s rules on prepayments and it is always advisable to consult with your tax adviser to determine whether this strategy makes sense for you.

Happy new year to all.