Tax Tips and Tidbits –

Special Tax Reform Edition – Part 1

December 22, 2017

By Steven R. Anderson E.A.

After months of wrangling, Congress passed the Tax Cuts and Jobs Act (TCJA), the largest rewrite of the tax code since the 1980’s.  There is much to analyze in this bill, and I’m sure there will be more votes to correct the problems, loopholes, and unintended consequences that such a large tax reform can create.

For now, we have new tax laws that will take effect on January 1.

I will address many of the details in the second part of this special edition which will be posted next Wednesday, but for now I want to address two items that I wanted to communicate to you right away.

First, none of this affects your 2017 tax return that will be filed in 2018.  All the old laws are still in effect, including the individual mandate to have health insurance.

Second, I have been receiving many inquiries asking about prepaying property taxes for 2018 in order to get the deduction this year, rather than next when it will be limited.  Here’s the scoop.

  1. TCJA will limit the deduction for State and Local Taxes (income, sales, and property) to $10,000. So, if your combined income and property tax deductions are less than $10K, you don’t have to worry {look on last year’s Schedule A, attached to your 1040, on line 9}.
  2. While TCJA prohibits prepaying income taxes, it is silent about property taxes.
  3. The IRS is also silent about prepaying property taxes. So, what’s the problem…
  4. Most taxing jurisdictions will not have their tax bills ready until after December 31. This is important for two reasons.
    1. The jurisdiction may not be setup to receive a payment before it is assessed.
    2. The Internal Revenue Code states that taxes must be “imposed on and paid by” the taxpayer to be deductible. If you pay the tax before it is imposed on you, the IRS could deny the deduction.

Bottom line:   Check with you tax assessor to see if the bills will be ready before the end of the year.  If they are, and you want to take advantage of this strategy, then go ahead.

Part 2 of this Special Edition of Tax Tips and Tidbits will be posted on Wednesday 12/27/17 and contain details of the provisions that will affect individuals.

Part 3 will be posted on Friday 12/29/17 and will contain answers to questions that you ask.  You can email me at [email protected] with your questions.  YOU NEED TO PUT “TCJA” IN THE SUBJECT LINE.  I will attempt to answer as many of them as possible.  Answers will not include any personal data!

In the meantime, enjoy the Holiday Season.



Steven Anderson is an Enrolled Agent, licensed to practice before the IRS.  He is the owner of the Beacon and Pawling franchises of H&R Block where he holds a Master Tax Advisor certification and has 28+ years of experience.  Steve is also a graduate of the National Tax Practice Institute and a member of the American Society of Tax Problem Solvers, and a Certified Tax Resolution Specialist.