So many of us were rushing to pay real estate tax before the year end because of the tax reform that was signed into law. Now, it may not be as necessary as many may have thought. This is an article from Northern Virginia Association of Realtors so you can understand why.
Prepaying 2018 Real Estate Tax in Northern Virginia of No Benefit
By Jill Landsman, NVAR Vice President of Communications & Media Relations
Last-Minute Crunch to Prepay NOVA Taxes Gives Way to Confusion, Time Wasted
Don’t shell out money for your tax bill just yet.
A tax loophole that eager taxpayers were hoping to take advantage of might be narrower than some thought.
Arlington, Alexandria and Fairfax localities have not assessed taxes for 2018.
This means that citizens’ prepayment of their taxes would not be deductible, according to a statement by the IRS. Consult with an accountant or a tax professional to review your own circumstances, advises the Northern Virginia Association of Realtors®.
The new tax bill, which takes effect on January 1, does cap to $10,000 the previously unlimited deduction for state and local taxes. The I.R.S. guidance about the ability of people to prepay property taxes this year does not apply locally for 2018.
This has led to confusion locally since many eager homeowners in Northern Virginia, a high-cost community, have prepaid taxes to save money.
Property taxes paid this year will be subject to the old 2017 rules, since those taxes are assessed in 2017.
To clarify county positions, each local government has published its own information:
The Arlington County Treasurer’s Office and Arlington County have received multiple inquiries based on the statement issued by the Internal Revenue Service on December 27, 2017, concerning deductibility of the property taxes. Neither the Treasurer nor the County staff will be offering individuals advice on tax issues and suggest people consult with a tax professional for any IRS related questions. Arlington County, through the Department of Real Estate Assessment issues real property tax assessments each year in mid-January. The assessments for Calendar Year 2018 will be completed in mid-January and mailed to residents at that time. Bills for taxes owed for calendar year 2018 are generated by the Treasurer after a tax rate is set by the County Board in April.
Those bills are due and payable in two installments – by June 15 for the first portion, and October 5 for the second portion.
On December 27, the Internal Revenue Service (IRS) issued an advisory stating that prepayment of 2018 local real estate taxes may not be deductible on 2017 federal income tax returns. The advisory follows the City of Alexandria’s December 21 announcement that while the City accepts prepayments, there may be no benefit of prepayment depending on a variety of factors. The City continues to encourage taxpayers who are considering prepayment to consult qualified tax professionals before deciding whether to prepay and determining the date by which payment must be sent or received. The IRS advisory clarifies that “a prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.” State law and the City Charter provide that all real property must be assessed at fair market value as of January 1 each year, and the amount of the real estate tax cannot be assessed until the tax rate is set by City Council in May of each year. Consequently, there is no legal or practical way for 2018 Alexandria property values or real estate taxes to be assessed in 2017.
More than 650 Alexandria taxpayers have made apparent prepayments of more than $6 million from December 1 through December 27. Customers who made prepayments may request refunds by contacting the City’s Treasury Division as indicated below, and including the taxpayer’s name, the address of the applicable property, the type of tax prepaid (real estate or personal property), the amount of the prepayment, the date of the prepayment, and the method of prepayment (in-person, by mail, online, or dropbox). Given the unprecedented potential for refund requests, refunds may take up to six weeks to process. Any prepayments not requested to be refunded will be applied to future 2018 balances if no other outstanding balances are due to the City.
The Fairfax County Department of Tax Administration (DTA) accepts real estate and vehicle tax prepayments from Fairfax County taxpayers. Fairfax County makes no representations about the deductibility of the advance tax payments for federal or state taxes. Residents are advised to seek tax advice from their tax advisors or from the Internal Revenue Service regarding deductibility of prepaid property taxes.
Tax rates for 2018 have not been finalized. Taxpayers seeking to prepay 2018 taxes may estimate their tax bill based upon their 2017 taxes, and any difference can be billed or refunded once the tax rate is adopted by the Board of Supervisors in April 2018. If you are currently getting your taxes escrowed, you will be responsible for working with your mortgage company on any future adjustments to your escrow account.
Taxpayers seeking a refund of prepaid taxes may do so by emailing Refunds@fairfaxcounty.gov and providing the following information:
- Date paid
- Amount paid
- Payment method (i.e., wire transfer, check, cash, etc.)
- Taxpayer name
- Taxes prepaid (i.e., real estate, personal property)
- Parcel ID or personal property #