Tax on real estate is a key source of revenue for local governments and school boards. The taxpayer's yearly bill is based on the value of his property. The figure can be variable, depending on the myriad factors that affect real estate. To ease the burden of the tax, some local governments accept payments in installments. You can make a full payment, but your tax assessor will determine an acceptable time period for advance payment.
Generally speaking, you can pay property taxes up to 12 months in advance.
Benefits of Advance Payment
There are advantages to paying your property tax before it's due. Some states will give you a discount on the bill if you pay the full amount early. Also, you can claim a deduction for the property tax payment when you file your state and federal taxes. To take the property tax deduction, you must itemize rather than rely on the standard deduction when preparing your federal tax return. Keep in mind that the new tax bill that went into effect for 2018 limits the property tax deduction to $10,000.
Each state's revenue office assesses property values each year. These assessments could lead to new valuations for the property and, consequently, a new property tax amount. If the property value remains the same, the associated tax will not change, but there is no guarantee that your assessment will stay the same for consecutive years. For this reason, revenue offices that allow advance payments typically only accept payments for the current year.
Paying into Escrow
Some tax assessor offices set up escrow accounts for residents who wish to prepay their property taxes. With this system, you can make a monthly payment toward the semiannual tax bill or the total amount due for the current year. The process allows taxpayers to remit payment in manageable amounts.
Making the Payment
Property tax assessors typically send out tax bills in October or November, with a due date in December or January. If you do decide to pay your property tax bill ahead of time, ensure that the office receives your check before the end of the year. If your payment arrives later, you cannot take it as a deduction for that year. You would have to wait and claim it in the following tax filing period. Consider mailing your check early, making the payment in person, or paying online.
- IRS: Topic 503 - Deductible Taxes
- CNBC: Property tax prepayment deadline looms as homeowners scramble
- The Washington Post: IRS says many who prepaid property taxes may still face cap on deductions
- Internal Revenue Service (IRS). "Publication 530 (2018), Tax Information for Homeowners." Accessed Jan. 14, 2020.
- Internal Revenue Service (IRS). "Topic No. 503 Deductible Taxes." Accessed Jan. 14, 2020.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2019." Accessed Jan. 14, 2020.
- Internal Revenue Service (IRS). "Topic No. 556 Alternative Minimum Tax." Accessed Jan. 14, 2020.
- Internal Revenue Service. "IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 If Assessed and Paid in 2017." Accessed Jan. 14, 2020.
Tina Amo has been writing business-related content since 2006. Her articles appear on various well-known websites. Amo holds a Bachelor of Science in business administration with a concentration in information systems.