It's Official, You Can Deduct Prepaid Property Taxes

From the Lake County Treasurer's Office: The more than 20,000 Lake County taxpayers who prepaid their property taxes last December are allowed to deduct their prepaid property taxes on their 2017 federal tax return, according to a statement from the U.S. Treasury Department. 

“The Lake County Treasurer’s Office is very pleased to be able to provide clarity on this question for local taxpayers,” Lake County Treasurer David Stolman said. “I would like to thank Congressman Peter Roskam (6th District) for his assistance in seeking confirmation that taxpayers in Illinois are not bound by previous IRS guidance regarding the prepayment of property taxes.” 

The U.S. Department of the Treasury agreed that an advisory issued by the IRS does not address Illinois and, therefore, taxpayers in Illinois are not bound by the IRS guidance and are able to deduct their prepaid property taxes. 


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Background: 
  • On December 27, 2017, the IRS issued an advisory regarding pre-payments of 2018 state and local real property taxes in 2017. 
  • The advisory provides information and examples relating to whether a taxpayer who makes a pre-payment in 2017 of real property taxes for 2018 or later would be eligible to deduct the payment on his or her 2017 federal tax return.
  • Illinois is unique in that property tax payments made each year are actually paying for the previous year.
  • As a result, prepaid property taxes made at the end of 2017 were actually prepaying 2017 property taxes, not 2018. 
  • The United States Treasury agreed that the advisory does not address Illinois.
  • Taxpayers in Illinois are not bound by the IRS guidance and they are able to deduct their prepaid property taxes.
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