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shivasana
New Member

I have a rental condo. Can I pay condo fee in December 2019 for the annual amount of condo fee in 2020 in advance for a higher tax deduction in 2019?

 
2 Replies
DoninGA
Level 15

I have a rental condo. Can I pay condo fee in December 2019 for the annual amount of condo fee in 2020 in advance for a higher tax deduction in 2019?

If you have received a bill for the 2020 condo fees and pay the fees prior to 01/01/2020 then you could claim the fees as a rental expense on the 2019 tax return.

Anonymous
Not applicable

I have a rental condo. Can I pay condo fee in December 2019 for the annual amount of condo fee in 2020 in advance for a higher tax deduction in 2019?

The general rule is that you can’t prepay business expenses for a future year and deduct them from the current year’s taxes. An expense you pay in advance can be deducted only in the year or years to which it applies. 

 

However, there’s an important exception called the 12-month rule. It lets you deduct a prepaid future expense in the current year if the expense is for a right or benefit that extends no longer than the earlier of:

12 months, or
until the end of the tax year after the tax year in which you made the payment.
Common prepaid expenses include rent, insurance, interest, and the cost of obtaining a lease or loan.

HOWEVER

 

Qualifying to Use the 12-Month Rule

To use the 12-month rule, you must apply it when you first start your business or first file taxes as an individual. You must get IRS approval if you haven’t been using the rule and want to start doing so. IRS approval is granted automatically. You must file IRS Form 3115, Application for Change in Accounting Method, with your tax return for the year you want to make the change. When you do this, you apply the 12-month rule to your prior years’ taxes, which may result in additional deductions and tax refunds for prior years. Filing Form 3115 is a complex process best done by a tax professional.

 

Se  IRS publication 538.   

 

besides the above, the issue I see is paying for something for which you haven't been billed (assessments for the whole year) 

 

 

 

in reality many taxpayer's will deduct expenses billed and paid in December that cover January.  Items like mortgage interest, assessments and the like.   they have established an accounting method.  

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