Managing Broker – Sequim, Washington
Here is a great Quiz from The National Association of REALTORS® Magazine. Do you know all you need to in order to exchange a property and defer capital gains? (Be sure to follow up with a Qualified Intermediary to see how current new laws may affect your exchange.)
With tax reform signed into law, homeowners in areas with high property taxes are scrambling to prepay their 2018 tax bill in order to take advantage of deductions that will be severely curtailed once the legislation takes effect Jan. 1. The new tax law, which Congress passed and President Donald Trump signed last week, caps the amount of state, local, and property taxes that homeowners can deduct at $10,000.
Some counties already allow for prepayment of taxes, while others are rushing to provide residents the ability to do so after strong demand. For example, local officials in Montgomery County, Md., say they’re fielding requests to prepay taxes for the first time ever, which prompted them to hold a special meeting the day after Christmas to come up with a plan.
“It just never came up [before],” George Leventhal, a Montgomery County councilman, told CNNMoney. “No one was saying, ‘Please let me make early payment of a bill I don’t owe yet.’ Wise cash management suggests you should pay closer to the due date, not farther away. But because of this change, it seems it could be possible that people could derive some benefit and deduct their property taxes for next year in 2017.”
Nearly half of the county’s taxpayers have more than $10,000 in combined state and local taxes, Leventhal says.
Still, there’s no guarantee homeowners who prepay their 2018 property taxes will be able to deduct the payment. On Wednesday, the IRS posted to its website an advisory notice that said prepaying property taxes will work only under limited circumstances. To qualify for the deduction, property taxes will need to be paid in 2017—but they also must be assessed in 2017. That means homeowners who prepaid their taxes based on estimated assessments or who tried to pay several years’ worth of taxes at once will likely still face the new limited deductions, The New York Timesreports.
Source: “Homeowners Scramble to Pre-Pay Property Taxes,” CNNMoney (Dec. 27, 2017) and “Prepaying Your Property Tax? IRS Cautions It Might Not Pay Off,” The New York Times (Dec. 27, 2017)
|Revenue Procedure 2007-56 permits extension of IRC §1031 exchange deadlines upon issuance of an IRS Notice or other guidance permitting relief to taxpayers due to Federally declared disasters. Note that an IRS Notice of a Federally declared disaster is different from a FEMA disaster declaration, and the extensions are not available until the IRS publishes its Notice granting relief which specifically references Revenue Procedure 2007-56.
Regarding the California wild fires, the IRS has issued a disaster relief notice relating to Orange, Solano, Butte, Lake, Mendocino, Napa, Nevada, Sonoma, and Yuba Counties in California extending deadlines as a result of the wildfires that began on October 8, 2017. The notice extends deadlines falling on or after 10/8/2017 and on or before 1/31/2018 for 120 days or until 1/31/2018 (whichever is later). To be eligible for the extension the relinquished property must have transferred before October 8, 2017.
As always, exchangers should speak with their tax advisors to determine if they are “affected taxpayers” and if so whether they are eligible for the extension.
Since this is an evolving situation, exchangers (and their advisors) should check the IRS website for updates. A link is on our website: https://www.irs.gov/uac/tax-relief-in-disaster-situations.
IRS Disaster Relief Updates
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