Tax Reform and Property Tax Deductions for Wisconsin Homeowners

Last December, Congress passed the Tax Cuts and Jobs Act of 2017, which was the most significant change to federal tax law in the last 30 years. This law affected nearly everyone in the United States, and financial experts are still working to fully understand the ramifications of its changes. One area that has caused some confusion is the law’s provisions for the deduction of state and local property taxes from one’s federal tax liability.

Wisconsin Homeowners Cannot Prepay 2018 Property Taxes

Prior to the passage of the new tax bill, property owners could claim an unlimited amount of state and local income and property taxes as deductions from their taxable income. However, the new law will limit this deduction to $10,000, starting in 2018. Some people have sought to take advantage of this impending change by prepaying their property taxes for 2018, allowing them to deduct taxes in excess of $10,000 on their 2017 tax return.

While prepaying property taxes is an option in some states, this strategy is not available in Wisconsin. State law does not allow homeowners to pay property taxes so far in advance. In addition, the Internal Revenue Service (IRS) has stated that only the exact amounts of property taxes are deductible, rather than an estimated amount. For Wisconsin homeowners, it is likely that they will be limited to the standard $10,000 deduction going forward.

Other Tax Deductions and Limits

While this limit on the deduction for state and local taxes may impose a burden on people who pay a large amount of property taxes, the Tax Cuts and Jobs Act sought to account for this by increasing the standard deduction that people can take. This deduction is now $12,000, or $24,000 for married couples filing jointly.

Homeowners should also be aware that the amount of mortgage interest which can be deducted has changed. Previously, homeowners could deduct interest for a mortgage of up to $1 million, or $500,000 for married couples filing separately. Under the new law, this limit has been reduced to $750,000, or $375,000 for married couples filing separately. This limit applies to mortgages taken out after December 14, 2017, but does not apply to newly refinanced mortgages which existed prior to that date.

Contact a Milwaukee Tax Assessment Lawyer

If you have any questions about how the tax reform bill affects your property taxes, the attorneys of Gimbel, Reilly, Guerin & Brown, LLP can help you understand your tax liabilities and work with you to determine your best options for tax abatement. Contact a Wisconsin tax assessment attorney today by calling 414-271-1440.

Sources:

https://www.twincities.com/2017/12/27/wisconsin-homeowners-cant-prepay-2018-property-tax-bill-to-get-around-new-federal-tax-law/

https://www.marketwatch.com/story/10-things-you-need-to-know-about-the-new-tax-law-2017-12-20