The IRS ruled in December 2017 that only property taxes paid in response to an assessment could be deducted on income tax forms in April 2018, but acting IRS Commissioner David Kautter recently announced that he will review this ruling.
For New Jersey property owners, who pay the highest property taxes in the nation, this is a significant issue. If the original IRS ruling stands, New Jerseyans would only be able to deduct half of their 2018 property taxes prepaid in 2017. New Jerseyans rushed to prepay these taxes in response to the federal tax law passed in December, which caps the federal deduction for state and local taxes at $10,000.
U.S. Reps. Leonard Lance and Josh Gottheimer, representing New Jersey’s 7th and 5th districts, respectively, met with Commissioner Kautter to argue their case that the rules should not be changed mid-game and that all 2018 property taxes that were paid in 2017 should be deductible on April tax forms. Rep. Lance noted that the payments were made in good faith, some before the IRS issued its ruling, and that then-Gov. Chris Christie had also ordered municipalities to accept property tax payments for all of 2018.
Reps. Lance and Gottheimer have also introduced legislation that would overturn the initial IRS ruling.
