Within $100, I am impressed. I usually pay slightly more than expected to avoid the penalty. I am lucky to come within $1,000. I don’t sweat over this. The interest income I’d earn by not overpaying is really not that much. If I overpay by 10%, I’d lose interest income of about 3% on that 10%, that would be 0,3%. It’s not nothing but not worth fussing over to me. Besides, it comes handy to have leftover payments to apply to the next years tax.
@techmom99, I think your town & county has to take your prepayment now under the Exec order. My town said no partial payment but the Exec order said they must accept that.
My school tax is billed in Sept. but I’m planning on paying that too. I’ll just use last years figure and pay any difference (which shouldn’t be too much more) in Sept.
Boo, hiss for your town. Who runs it, Scrooge?
My town/county offers a small discount if you make both annual payments together, so they encourage prepayment. I did prepay my general taxes because I had a little extra money and wanted it out of the account before I filed FAFSA. I hadn’t even thought about whether it was deductible for this year at that point in time because the SALT issue hadn’t arisen yet. My school taxes are not posted yet, but I could follow your lead and use last year’s number. I was going to use my holiday bonus to pay off some credit card debt, but now I am going to apply it to the property taxes.
I have told my H that our long term plans MUST include leaving our current area. I would be happy to live in his mom’s house in Queens, where the taxes are under the SALT limit and I don’t have to worry about the school system, but I can no longer justify living where I do and paying the enormous taxes here. AMT aside, and I know it reduced the value of my deduction, I felt like I was getting value when I had the SALT deduction. No longer, my house just feels like an enormous albatross preventing me from retiring or enjoying my life.
I just read an article that the section preventing people from prepaying and deducting 2018 state income taxes in 2017 has a technical issue that wasn’t corrected before Trump signed the tax act yesterday. Apparently it’s written to apply to years ending after 12/31/17 (instead of 12/31/16). (Even though the explanation found later in the 1,097 page document DOES state it’s applicable to years after 12/31/16).
I was looking at how the provisions affect landlords. There’s been plenty out there about the boon to wealthy landlords, however, it appears that this bill is a tax cut to almost all landlords (who have a profit, not loss), including a tax deduction. I’m not sure I understand it, though. From what I can tell, it looks like you can get a deduction. I’m guessing that’s only if you itemize? Or maybe not.
It appears you can get this if you’re a sole proprietorship, which sounds pretty simple. All you need is a name and to pay a $5 filing fee with Washington state. Once we tried to form an LLC, and got back a complicated tax packet from the state, about an inch thick…which went in the garbage, and we cancelled the LLC. I don’t want to do a bunch of crazy gyrations to avoid a little tax, but if it’s something minor that our accountant can do, it’s worth looking into.
Another thing I am thinking about is that if my tax bracket is going down by a percent, I am going to increase my 401K contributions by the same percent and see how that affects my bottom line.
@techmom99, I’m skeptical about the prepaying the school tax part because I anticipate my town will use the “tax warrants” aren’t issued until Sept, blah, blah, blah - plus, as of several year ago the payment goes directly to the school district now - not to town’s Receiver of Taxes.
I’m going to go look st the school districts webpage to see if there is anything about prepaying there.
@busdriver11. Just as an aside, if you’re a landlord without the LLC you have no legal protection. All your assets would be up for grabs in the event of a lawsuit related to the property. With the property in an LLC you’ll have legal protection in most cases and only risk the property itself. Depending on how this tax law shakes out, you may want to reconsider.
Yes, we have thought about that, @yourmomma, but after looking at the massive state level hassle, we decided just to up our umbrella insurance. That way we can use the umbrella insurance for any issue.The properties are condo’s, with individual insurance policies and common policies within the condo association also.
Out town was VERY clear. We cannot pay any taxes for bills that have NOT yet been generated. In other words…our property taxes due July 2018 cannot be paid…because they have not yet set the mill rate for 2018…and we don’t actually OWE anything towards that amount.
The bill due by January 1 was our 2017 property tax bill… for which we were given the option of paying in two payments…back in June 2017. We actually OWE that amount.
So we paid it.
My tax bracket %age is going down…but therefore, it seems…so will my withholding for Federal income taxes.
Yes…and this is what I was doing…but without the exemptions…and the likely changes in actual withholding, it’s a shot in the dark.
You know…it will be what it will be. We will out some money in a dedicated savings to cover any amount we might need to pay additional in April 2019 when we file our 2018 tax return. If there isn’t an additional payment required…we will consider our savings our “refund”.
If you manage your own rentals, an LLC dies not provide asset protection because you would be sued as the manager.
Not sure how or if you can move rentals off of schedule E using a sole proprietorship. If you can you might wind up paying SECA taxes on the income, which would undo a lot of the benefit of the deduction.
Yeah I don’t even want to mess with the B&O tax…it’s likely not worth the effort for a little tax savings.
We do manage our own properties, so good to know a LLC would not help us.
That’s what a lawyer told me, others may have a different opinion.
In my state, corporations pay a minimum fee of $500 or so every year, regardless of income or profit. Creating an LLC per property would wipe out most of the benefit of the small business deduction for us.
I texted my friend who is on the school board in my town and is also a CPA to ask if the district is planning to do anything about prepaying the school taxes. There’s nothing on the town site. H and I discussed this and the worst that can happen is we pay the taxes early and it doesn’t count. We still have to pay them at some point.
@notrichenough. I think you might have misunderstood your lawyer (or he was wrong). Yes you will be sued. Your wife and kids will be sued. Your dog will be sued. If a condo like this instance the association will be pulled in. The lawyer will sue everyone he can looking for the deep pocket. However, the LLC will attempt to limit any recovery to the asset in the LLC. That’s why you see so many single asset LLCs. Yes it would be a real mess. And it’s a good idea to have as much comprehensive insurance as possible. Given the low cost of an LLC it’s a good idea, but everyone is free to make their own decisions. With a single condo I would be less concerned than a 20 unit apartment building.
So is it the understanding that rental units where the details are provided on Schedule E and the gain or loss to the 1040, but not officially LLC’s or whatever recognized entities will or will not be included in the provision? So confused. I think we looked at doing an LLC once, but it involved some massive amount of effort/money?
Corporate veil can be pierced, for example:
https://app.leg.wa.gov/rcw/default.aspx?cite=25.15.061
Again, it depends on how WA courts interpreted the statute.
Creating a corporation seems especially painful in WA – I looked at moving my S-corp to WA, and ended up leaving it in the original state with an agent and registering as a foreign corp in WA. It was just a huge hassle.
@yourmamma the way it was explained to me is that if the LLC is sued only the asset in the LLC is vulnerable, but if we are sued personally our ownership of all of the LLCs (as opposed to the assets in the LLC) would be at risk. Since we manage everything ourselves the LLC wouldn’t provide any real protection.
So we have a large umbrella to provide protection. We’ve been sued before, the insurance company handled everything (and we won anyway).