Are There Benefits to Prepaying Your Property Taxes in the U.S.?

BY V.L. Hendrickson | Mansion Global



The new tax law has changed the answer



Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.


Q: Can you prepay property taxes in the U.S. and are there benefits to doing so?

A: Although there was a lot of talk about prepaying property taxes at the end of 2017, just after the Tax Cuts and Jobs Act was signed, doing so now is basically "a waste of time," said Roy Greenberg, a lawyer in East Hampton, New York.


"It used to make sense, so you could get a bigger tax deduction," he said. For instance, homeowners might pay their taxes in one lump sum at the end of the year, instead of half now, half later, to get the full deduction on that year’s income tax bill.


But now, with the new $10,000 cap on all state-and-local taxes, most people in high-tax states will have already maxed out their deductions, according to Mr. Greenberg.


In addition, no one knows what the local property taxes will be from year to year, he said. The rate is set after the annual budget is determined, and homeowners generally get a bill at the beginning of December for the next year’s taxes.


That’s true for many municipalities, including Denver, according to Ken Kramer, a lawyer at the Denver-based firm Spencer Fane. There, tax rates are set at the end of the year as well, and although homeowners may use the previous year’s bill as a guide, the exact amount won’t be known until year’s end.


Additionally, the rates may change due to unexpected events or natural disasters.

For example, some homes in Hawaii were destroyed this year because of the volcano eruption, or they can no longer be accessed because the roads were destroyed. For those homeowners, taxes will be "reduced to zero," according to the County of Hawaii Real Property Tax website.

Homes lost to fire or hurricane in other regions of the country could also see a reduction or nullification of their taxes because of damage.


Also, for those with financing on their homes, the bank probably pays the property taxes, Mr. Greenberg pointed out. And the bank is not going to part with their money any sooner than it has to, he said.

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