I bought a home in '17 and was hit with a large supplemental prop tax bill in '18. The supp put me well over the new $10K cap. Can I can amend my '17 return to deduct?

[Anonymous]

I'm in California where we're hit hard by the new $10,000 cap on property tax deductions. My annual property taxes are already $13K. I bought by home in Feb 2017 and paid ~4K in property taxes in 2017 (everything I had been billed for). Then I was hit with a supplemental bill for almost $10K in 2018. With my normal annual property taxes, I have paid more than double what I am allowed to deduct, but half of that is for 2017. This is certainly the worst year for this to happen since, any other year, I could have just deducted the supplement in the year paid. Is there any way to avoid being penalized for only being assessed the supplement in 2018?

[xmasbaby0 · Accepted solution]

Property tax is deductible for the year you PAID it, not the year it was billed for.  If you did not pay it in 2017, it cannot go on your 2017 tax return.  Sorry.

[TaxGuyBill]

I agree.

If the "supplemental" property tax bill is for isn't actually property tax, but is actually "assessment" to cover the cost of something that the city/state did (such as sewer lines, roads, etc.), that is not part of the deductible property tax anyways.

[Anonymous]

The supplemental bill was due to the property being reassessed for a higher value after purchase. Unfortunately, it look them months to accomplish this and so we didn't receive the bill until well into 2018. If the home had been assessed at the full value when the original bill was sent, we would have been billed and paid the entire amount in 2017. Really bad timing that we happened to buy the house in 2017 and then this cap was introduced.

[fanfare]

not bad timing, bad Congress.

[Anonymous]

Would the option to ratably accrue real property taxes during the first year in which property taxes are incurred apply to this situation since I purchased the home in 2017 and the taxes were accrued during that year (despite me not receiving the bill until 2018)? See 26 U.S.C. § 461 (c)(2)(a)

[TaxGuyBill]

No.  Read the paragraph before that in (1).  That applies to taxpayers who use the Accrual method of accounting.

[xmasbaby0]

@erika_morgan You are going to be among the many homeowners who are unhappy about the limit on the property tax deduction for 2018 and beyond.  Despite all of the information available, there are going to be people who start preparing 2018 tax returns who will be stunned to discover the limit.  At least you know now, and will not be shocked when you prepare your 2018 return.

[Anonymous]

Yep. Anyone like myself who bought new construction in 2017 is going to be particularly burned by this because the actual value of the home was not fully assessed and billed until 2018. I just wish I would have been billed the 2017 taxes fully in 2017 itself. The change in tax code seems to hit 2017 home purchasers particularly hard for that reason. I was hoping there might be some provision or workaround to avoid people in our situation from being disproportionately penalized but, alas, it doesn't appear so.