What about those pre-paid property taxes?

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After the federal government passed its tax reform package at the end of 2017, thousands of Minnesotans lined up before Dec. 31 to pre-pay their 2018 property taxes. That is because of a change in federal law that now caps the total amount of state and local taxes that may be deducted on federal tax returns at $10,000.

Those making prepayments were hoping to deduct the full amount of their 2018 state and local taxes on 2017 federal tax returns – and many are doing so as they file their 2017 taxes before this year’s April 17 deadline. However, guidance from the IRS as to whether this will be accepted is still unclear.

This week, the Minnesota Department of Revenue issued a request for clarification from the IRS. Minnesota’s tax officials have said they will follow federal treatment of these prepayments, meaning if they are considered an acceptable deduction at the federal level, Minnesota will follow suit. The Revenue Commissioner’s letter to the federal government may be found here.