On December 22, 2017, Governor Andrew M. Cuomo signed an executive order that allows homeowners in New York to prepay their 2018 property taxes by the end of 2017. The goal is to mitigate the impact of H.R. 1 (known as the “Tax Cuts and Jobs Act”) signed into law by President Trump which modifies and limits the state and local income tax and property tax deduction. Under prior law, in general, subject to the alternative minim tax, state and local income tax and property tax could be deducted from federal income taxes of an individual if the taxpayer itemized their deductions, even if the deduction was unrelated to business or for-profit activity. The Act modifies this deduction for state and local income and property taxes, subject to a $10,000 exception ($5,000 for married taxpayer filing a separate return). It should be noted that foreign real property taxes are not subject to this exception and therefore, foreign real property taxes cannot be deducted.*1
The Act also provides that one cannot prepay their 2018 income taxes in 2017 to avoid this change in 2018. However, such limitation does not apply to property taxes. Therefore, state and localities are encouraging their constituents to prepay their property taxes before year-end, if possible. We also encourage our clients who might be affected to do the same.
*1 For your convenience, we have included Section 11042 of the Act.