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Re: pre-paying 2018 taxes
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Quote:

bodhipooh wrote:
We obviously have different interpretations of their statements. From the JC Twiter feed:
"While the Republican tax plan is terrible for working families, we are going to try to minimize damage."

Is that not saying/implying that prepaying property taxes is a good thing?

The full quote is:

“While the Republicans in Washington are doing everything they can to hurt working families we are going to do our best to minimize the damage. This will take some procedural changes but those that want to prepay their 2018 taxes we will accept.”

Also, last week, Fulop Tweeted: "That republican tax bill is just bad for New Jersey. We are trying all we can do to minimize disruption in near term. This will at least give some an opportunity to still take the SALT deduction"

Is he telling everyone to prepay? Nope. He's using the opportunity to bash Republicans while giving some residents a small tax shelter.

Note that he is not saying "everyone should do this" or "this benefits everyone," or saying "this is a better use of your money than X." That would certainly be irresponsible.


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As for the AMT part of my post, the point that was lost in you is that this is not about AMT in 2018, but AMT for this year!

OK, point taken.

Still, most people in AMT territory at least have the ability to ask a tax pro whether they should pre-pay, nor is Fulop saying (in very brief statements btw) that everyone should do this, regardless of their tax situation.


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If you can afford to prepay 10+ K in property taxes this year, you are likely making enough money to have to pay AMT. In that case, prepaying is entirely a waste. Particularly if you prepay the taxes by taking out money from money market or savings accounts.

I'd say that is a stretch. You don't have to pull down six figures to have some cash in the bank.

You should also check the interest rates on those money market and savings accounts, as it's pretty close to zero. Literally. Bank of America offers what, 0.6% on its largest savings account? 0.7% on a 12-month CD? MMAs offer rates under 1.5%.

E.g. if you put $10k in a MMA today, you'll be lucky to get 1.5%. Over 490 days, you'd earn $200. If you use that to prepay some property tax, and get even a $500 tax benefit out of it, then you've benefitted.

Posted on: 12/27 9:51
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Re: pre-paying 2018 taxes
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now, what about pass-thru and 20% tax rate. do small scale and/or llc landlords count as pass-thru's?

Posted on: 12/27 9:26
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Re: pre-paying 2018 taxes
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thanks mdm. i had the same question but i thought i'd toss it out there.Quote:

MDM wrote:
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hero69 wrote:
any word on whether small scale landlords will still be able to deduct property taxes along with other expenses from rents to derive net income. if not, would landlords be able to have tenants pay the property taxes directly to the municipality and then adjust tenants' rent for the difference?


From my understanding so far, the tax bill was property investor friendly. You still file a K-1/1065 or schedule E (depending on how you setup), deducting your passive losses (i.e. taxes) from your passive income (rents).

In Feb I meet with my tax pro, who will fill me in on the details of what is in store for 2018.


Posted on: 12/27 9:20
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Re: pre-paying 2018 taxes
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hero69 wrote:
any word on whether small scale landlords will still be able to deduct property taxes along with other expenses from rents to derive net income. if not, would landlords be able to have tenants pay the property taxes directly to the municipality and then adjust tenants' rent for the difference?


From my understanding so far, the tax bill was property investor friendly. You still file a K-1/1065 or schedule E (depending on how you setup), deducting your passive losses (i.e. taxes) from your passive income (rents).

In Feb I meet with my tax pro, who will fill me in on the details of what is in store for 2018.


Posted on: 12/27 9:13
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Re: pre-paying 2018 taxes
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any word on whether small scale landlords will still be able to deduct property taxes along with other expenses from rents to derive net income. if not, would landlords be able to have tenants pay the property taxes directly to the municipality and then adjust tenants' rent for the difference?

Posted on: 12/27 9:03
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Re: pre-paying 2018 taxes
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Yes, indeed, the 2017 AMT is a very relevant detail. Another is if taxes are paid by a bank out of mortgage escrow which will be the situation for many property owners.

Posted on: 12/27 8:10
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Re: pre-paying 2018 taxes
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As for the AMT part of my post, the point that was lost in you is that this is not about AMT in 2018, but AMT for this year! If you try to take an additional deduction for 2017 by prepaying the 2018 property taxes, you will not see ANY benefit at all if you are going to get hit by AMT in 2017. If you can afford to prepay 10+ K in property taxes this year, you are likely making enough money to have to pay AMT. In that case, prepaying is entirely a waste. Particularly if you prepay the taxes by taking out money from money market or savings accounts.


...golden words! Pay attention to this dear fellas!

Posted on: 12/26 22:59
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Re: pre-paying 2018 taxes
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Dolomiti wrote:
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bodhipooh wrote:
Anyone considering prepaying their property taxes should do their homework and calculate/estimate whether this is actually beneficial. I honestly feel these politicians are being super irresponsible in portraying the prepayment of property taxes as a sure way to be able to take advantage of the deduction.

I don't see anything irresponsible about it.

They're not telling you whether it's a good or bad idea, they're just accepting pre-payments.


Quote:
My take is that most people in position to be able to prepay taxes is likely earning enough money to get hit with the AMT.

FYI, the AMT thresholds will be raised significantly (doubled?) for tax year 2018.

Figuring out the precise effects will be... difficult. That said, I can't think of any particular down side to pre-paying your property taxes, as long as you have the cash on hand, and can spare it now to save a few bucks in, uh... April 2019.


We obviously have different interpretations of their statements. From the JC Twiter feed:
"While the Republican tax plan is terrible for working families, we are going to try to minimize damage."

Is that not saying/implying that prepaying property taxes is a good thing? It is, after all, a way "to minimize damage" according to the tweet. That seems to be like they are saying it *is* a good thing.

As for the AMT part of my post, the point that was lost in you is that this is not about AMT in 2018, but AMT for this year! If you try to take an additional deduction for 2017 by prepaying the 2018 property taxes, you will not see ANY benefit at all if you are going to get hit by AMT in 2017. If you can afford to prepay 10+ K in property taxes this year, you are likely making enough money to have to pay AMT. In that case, prepaying is entirely a waste. Particularly if you prepay the taxes by taking out money from money market or savings accounts.

Posted on: 12/26 22:38
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Re: pre-paying 2018 taxes
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The first step would be to figure out if you paid AMT in your 2016 federal tax return. If you did then I wouldn't even bother prepaying your property taxes in 2017. Look at line 45 of your 2016 form 1040. If there is an amount there then you paid AMT and you received no federal tax benefit from paying property taxes.

Posted on: 12/26 20:41
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Re: pre-paying 2018 taxes
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So what are the steps for pre-paying the taxes? This is my first year as a home owner in Jersey City so not clear about the process.


Posted on: 12/26 16:50
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Re: pre-paying 2018 taxes
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bodhipooh wrote:
Anyone considering prepaying their property taxes should do their homework and calculate/estimate whether this is actually beneficial. I honestly feel these politicians are being super irresponsible in portraying the prepayment of property taxes as a sure way to be able to take advantage of the deduction.

I don't see anything irresponsible about it.

They're not telling you whether it's a good or bad idea, they're just accepting pre-payments.


Quote:
My take is that most people in position to be able to prepay taxes is likely earning enough money to get hit with the AMT.

FYI, the AMT thresholds will be raised significantly (doubled?) for tax year 2018.

Figuring out the precise effects will be... difficult. That said, I can't think of any particular down side to pre-paying your property taxes, as long as you have the cash on hand, and can spare it now to save a few bucks in, uh... April 2019.

Posted on: 12/26 15:17
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Re: pre-paying 2018 taxes
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http://taxplancalculator.com/

Nice tax tool.. gives comparison of what you might be paying now vs. in future

Posted on: 12/26 12:26
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Re: pre-paying 2018 taxes
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Anyone considering prepaying their property taxes should do their homework and calculate/estimate whether this is actually beneficial. I honestly feel these politicians are being super irresponsible in portraying the prepayment of property taxes as a sure way to be able to take advantage of the deduction. My take is that most people in position to be able to prepay taxes is likely earning enough money to get hit with the AMT. In that case, prepaying property taxes is completely pointless, as the person will NOT be able to take the deduction anyway. I know that, for me, that is definitely the case, so prepaying is not even a remote consideration.

Posted on: 12/23 19:07
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Re: pre-paying 2018 taxes
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From NY State website - Cuomo is being proactive, like mayor Fulop, in facilitating the prepayment of 2018 taxes in 2017.

https://www.governor.ny.gov/news/gover ... deductibility-new-yorkers

Executive Order Authorizes Localities to Issue Warrants For the Collection of Early Tax Payments

Executive Order Allows Taxpayers to Make Partial Property Tax Payments

Governor Directs State Department of Taxation and Finance to Work With Localities to Facilitate Early Tax Collection

Action Helps New Yorkers Avoid Devastating Impact of the $10,000 Cap on SALT Deductions in the GOP Tax Bill

Governor Andrew M. Cuomo today issued an emergency Executive Order to help protect property owners in New York from the devastating impact of the GOP tax bill. This order authorizes local governments to immediately issue tax warrants for the collection of 2018 property tax payments and allows property owners to pay at least a portion of their bill before the end of the year and under the current tax construct. The Governor directed the Department of Taxation and Finance to work with local governments to facilitate early tax collection.

The federal tax plan, signed into law today, caps the deductibility of state and local taxes at $10,000, effectively raising property taxes and reducing home values in New York and in states across the country.

"As Washington wages an all-out assault on this state and this nation, I have authorized local governments to allow property owners to pay part or all of their taxes early," Governor Cuomo said. "New York has made unprecedented progress reducing the burden of taxes on our middle-class families, and we will not allow this attack to roll back all that we have achieved. This Executive Order will allow property owners to deduct either part or the full amount of their payment from their federal taxes before the GOP tax bill goes into effect."

Governor Cuomo signed Executive Order #172 today, which includes two actions:

Authorizes Local Officials to Immediately Levy Taxes

The Governor authorized local governments to immediately issue warrants to levy property taxes by the end of the year. Officials should issue warrants for the collection of taxes and deliver them to the local tax collector immediately, and no later than 11:59 p.m. on Thursday, December 28, 2017.

This will allow New Yorkers to pay their property taxes for 2018 in the 2017 calendar year and allow localities to accept advance payment so that property owners can deduct the full amount of their payment at the federal level.

Allows Taxpayers to Make Partial Payments Early

The EO will also suspend local laws limiting the ability of taxpayers to make partial payment of property taxes until the end of the year. Since many taxpayers do not yet know the exact amount of their bill, this will allow for a portion of taxes to be paid early and under the current federal tax law.

Each local tax collector is now authorized and directed to accept partial payments of warranted taxes from property owners until the close of business on Friday, December 29, 2017. Online payments can be made until 11:59 p.m. on Sunday, December 31, 2017, and payments made by mail that are postmarked on or before December 31, 2017 are authorized.

New York State Budget Director Robert Mujica said, "For those local government and school districts able to issue their warrants before the end of the year, we encourage them to do so. We understand that for some, it would not be feasible nor practical."

New York State Association of Counties Executive Director Stephen J. Acquario said, "We commend Governor Andrew M. Cuomo for using his executive authority to provide options for homeowners in New York to prepay their 2018 property taxes. Due to the end of year time frame, this action is necessary to provide local authority to receive the taxes for payment in 2017."

New York State Conference of Mayors Executive Director Peter A. Baynes said, "As the capping of the SALT deduction has become a painful reality for New York, our city and village leaders have been doing all they can legally to allow full or partial prepayment of 2018 property taxes in 2017. Fortunately, today's decisive action by Governor Cuomo will assist our members as they help their residents deal with the negative financial impacts federal tax reform will have on millions of New Yorkers."


Posted on: 12/23 10:43
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Re: pre-paying 2018 taxes
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I’ve heard some anecdotes that the City Tax Collector started taking prepayments Friday afternoon. I have not verified this.

Posted on: 12/22 20:08
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Re: pre-paying 2018 taxes
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The CNBC article was amended. They were wrong about the property tax part. It appears you can prepay.

Posted on: 12/22 19:32
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Re: pre-paying 2018 taxes
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papadage wrote:
What NJ does is immaterial since the state and local tax deduction wording, as written, means that even if you pre-pay it, you will not be able to deduct it for 2017 taxes. The language of the new tax law only allows you to deduct state and local taxes in the year they are due.

It was written purposefully to prevent prepayment.

https://www.cnbc.com/2017/12/18/prepay ... -blocked-in-gop-bill.html


The article you're quoting is several days old... look at this Washington Post Article
https://www.washingtonpost.com/news/wo ... l/?utm_term=.90229543d958

There are several other serious news articles that also make the same argument.

Posted on: 12/22 19:32
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Re: pre-paying 2018 taxes
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Then way did the mayor get our hopes up, he should have read it through.

Posted on: 12/22 18:20

Edited by heights on 2017/12/22 18:46:12
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Re: pre-paying 2018 taxes
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What NJ does is immaterial since the state and local tax deduction wording, as written, means that even if you pre-pay it, you will not be able to deduct it for 2017 taxes. The language of the new tax law only allows you to deduct state and local taxes in the year they are due.

It was written purposefully to prevent prepayment.

https://www.cnbc.com/2017/12/18/prepay ... -blocked-in-gop-bill.html

Posted on: 12/22 18:02
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Interesting Article - Read the Comments, Too (AMT Focus)

Specifically this exchange;

14matchfan 6 hours ago
@Karin Price Mueller | NJMoneyHelp.com for NJ.com @BR boy
For Federal tax filing purposes, prepaying property taxes and claiming them is OK. BUT, NJ has seemingly changed their rules over the years and when you file your NJ return, you may not be allowed to get the credit for prepaying your 2018 quarters. The exact verbiage from the 2016 NJ 1040 instructions states (on page 30) what property taxes means for homeowners: "The amount of property taxes due and paid to your municipality on your principal residence for 2016." Years ago, I did this to avoid AMT damage and was successful in defending my position. However, I think the language has changed to preclude this. What is the impact to NJ tax filing? Will NJ allow the extra 2018 tax payments to be claimed in the 2017 filing. If not, do you lose the ability to claim them in your 2018 filing since you paid them in 2017?

Karin Price Mueller | NJMoneyHelp.com for NJ.com 6 hours ago I've spoken to several CPAs who said it is allowed. Another complication is that towns treat this differently. Some only bill one quarter ahead of time, while others bill more. You can't pay it if your town won't yet give you a bill, so keep that in mind.

@14matchfan @BR boy
I just called up the NJ Division of Taxation and they don't agree. You can only claim up to what was paid and due for the tax year. This is supported in the line by line instructions for the 2016 NJ 1040. The person I spoke with was quite confident. Maybe the CPAs you spoke with thought you were talking about the Federal return??? Please get clarification as I believe a lot of people may be in for a surprise with their NJ returns...

Posted on: 12/22 17:09
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Re: pre-paying 2018 taxes
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Adonis wrote:
Quote:

dr_nick_riviera wrote:
Quote:

Adonis wrote:
I really hope everyone in Jersey City takes advantage of this and pre-pays all that they can in property taxes. Then, when they file their 2017 tax returns in a few months, they will be smacking their heads how they wound up having to pay the Alternative Minimum Tax, ("AMT"), whereby these property tax pre-payments will have offered no benefit at all and in fact will have been detrimental.

Great job Mr. Mayor. Keep up the Trump resistance.


Can you please clarify how someone who normally itemizes would wind up in AMT category by simply paying extra in taxes this year? Please use real numbers/figures and citations.


Sorry. I don't have time to go through all that as if I'm in class and you're the teacher making me prove out my math answer. If you were familiar with the intricacies of personal federal tax returns then you would know this to be true.


The AMT doesn't affect everybody, it really depends on the mix of income and deductions you have. There are even people at certain income levels whose taxes end up as higher under the regular tax rules than under the AMT (these are typically people at the highest of high incomes). But there is probably some truth to the fact that anybody with enough money to prepay all of next year's property taxes likely has enough income to be subject to the AMT.

Furthermore, the IRS is actually silent on the issue as to whether you can deduct prepaid 2018 property taxes in 2017. From what I've read, since Congress didn't address this property tax issue in the legislation (like they did by disallowing deductions for prepaid state income taxes), it's up to the IRS whether the deduction will be allowable on the 2017 returns anyway.

Posted on: 12/22 16:35
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Re: pre-paying 2018 taxes
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Adonis wrote:
I really hope everyone in Jersey City takes advantage of this and pre-pays all that they can in property taxes. Then, when they file their 2017 tax returns in a few months, they will be smacking their heads how they wound up having to pay the Alternative Minimum Tax, ("AMT"), whereby these property tax pre-payments will have offered no benefit at all and in fact will have been detrimental.

Great job Mr. Mayor. Keep up the Trump resistance.


Can you please clarify how someone who normally itemizes would wind up in AMT category by simply paying extra in taxes this year? Please use real numbers/figures and citations.


Sorry. I don't have time to go through all that as if I'm in class and you're the teacher making me prove out my math answer. If you were familiar with the intricacies of personal federal tax returns then you would know this to be true.

Posted on: 12/22 16:21
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Ralph_Abutts wrote:
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dr_nick_riviera wrote:

Can you please clarify how someone who normally itemizes would wind up in AMT category by simply paying extra in taxes this year? Please use real numbers/figures and citations.


You will be penalized with AMT if the total dollar amount of deductions is too large. That is, if you deduct too much, some of it is pulled back/recaptured with AMT.

As for AMT calculations, the IRS form you use is a hot steaming messy pile of you-know-what. I always relied on tax software to perform the Byzantine calculations. AMT was intended to ensure the rich, high income paid some tax. From wikipedia, "Congress introduced the AMT after it was discovered that 21 millionaires did not pay any US income tax in 1969 as a result of various deductions taken on their income tax return."

The rules, formulas, etc. were never adjusted for inflation/income growth, so decades later it has been a scourge for middle income tax payers. That is, one deducts their very high state and local taxes paid, living in a high tax/high cost of living state, and by way of AMT rules, one is penalized (IMHO) with paying even more (federal) taxes because you paid too much state & local taxes. It is really asinine.


Adonis and Ralph_Abutts are correct: filers able to afford the prepaying of property taxes are likely earning enough income to get hit with AMT if taking too many deductions.

I disgareee that the form is complicated to use or figure out (it is actually a worksheet in the 1040 instruction booklet) but for anyone earthing over 160K in 2017, you will certainly have to fill it out. Essentially, the AMT “disallows” most of the schedule A deductions to ensure you pay taxes of at least 26 or 28 percent of your taxable income. Living in NJ, if you are a homeowner, itemizing, and earning over 150K, you are likely already paying AMT, or awfully close to having to do so.

https://www.fool.com/taxes/2017/04/15/ ... ernative-minimum-tax.aspx

Posted on: 12/22 13:19
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Re: pre-paying 2018 taxes
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SOS wrote:
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Ralph_Abutts wrote:
No mention of nor is it about illegality, but rather limiting your federal tax payment by paying your local taxes now to get the bigger tax deduction.....that is assuming it is permissable under the new federal tax code. I doubt many of the fed legislators read ALL of the hundreds of pages of legislation bwfore voting, so who else would have parse out all of the details post vote in such a short amount of time to know if such is feasible ?!?


There is no new federal tax code. It won't be signed until January 1 or later. So the current tax code is still in effect.


Trump signed the tax bill into law. There was conflicting information on when this would happen -

http://fortune.com/2017/12/21/trump-signs-tax-bill-january/

"President Donald Trump may have to wait until after the New Year to sign a sweeping tax reform bill to avoid triggering automatic cuts to Medicare and other programs..."

The law goes into effect January 1st.

Posted on: 12/22 11:24
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dr_nick_riviera wrote:

Can you please clarify how someone who normally itemizes would wind up in AMT category by simply paying extra in taxes this year? Please use real numbers/figures and citations.


You will be penalized with AMT if the total dollar amount of deductions is too large. That is, if you deduct too much, some of it is pulled back/recaptured with AMT.

As for AMT calculations, the IRS form you use is a hot steaming messy pile of you-know-what. I always relied on tax software to perform the Byzantine calculations. AMT was intended to ensure the rich, high income paid some tax. From wikipedia, "Congress introduced the AMT after it was discovered that 21 millionaires did not pay any US income tax in 1969 as a result of various deductions taken on their income tax return."

The rules, formulas, etc. were never adjusted for inflation/income growth, so decades later it has been a scourge for middle income tax payers. That is, one deducts their very high state and local taxes paid, living in a high tax/high cost of living state, and by way of AMT rules, one is penalized (IMHO) with paying even more (federal) taxes because you paid too much state & local taxes. It is really asinine.

Posted on: 12/22 11:15
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Adonis wrote:
I really hope everyone in Jersey City takes advantage of this and pre-pays all that they can in property taxes. Then, when they file their 2017 tax returns in a few months, they will be smacking their heads how they wound up having to pay the Alternative Minimum Tax, ("AMT"), whereby these property tax pre-payments will have offered no benefit at all and in fact will have been detrimental.

Great job Mr. Mayor. Keep up the Trump resistance.


Can you please clarify how someone who normally itemizes would wind up in AMT category by simply paying extra in taxes this year? Please use real numbers/figures and citations.

Posted on: 12/22 10:59
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I really hope everyone in Jersey City takes advantage of this and pre-pays all that they can in property taxes. Then, when they file their 2017 tax returns in a few months, they will be smacking their heads how they wound up having to pay the Alternative Minimum Tax, ("AMT"), whereby these property tax pre-payments will have offered no benefit at all and in fact will have been detrimental.

Great job Mr. Mayor. Keep up the Trump resistance.

Posted on: 12/22 10:51
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Ralph_Abutts wrote:
I stiill stand by comments that it is too premature to know if one can benefit by paying early both with the tax code itself and when the prez will sign the bill into law. One may save on fed taxes, but if wrong it is a big opportunity cost especially how the financial markets have bullishly performed.


Perhaps your comments about the market are true.

OTOH, I know I'll get my marginal rate worth of tax deductions back from pre-paying next years taxes as a sure thing, plus I'll most likely take the standard deductions next year, so in essence I'll be double dipping. I'll take the sure bet vs the potential returns for the partial year stock market gains.

Posted on: 12/22 8:52
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Re: pre-paying 2018 taxes
#19
Just can't stay away
Just can't stay away


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I stiill stand by comments that it is too premature to know if one can benefit by paying early both with the tax code itself and when the prez will sign the bill into law. One may save on fed taxes, but if wrong it is a big opportunity cost especially how the financial markets have bullishly performed.

Posted on: 12/22 8:02
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Re: pre-paying 2018 taxes
#18
Home away from home
Home away from home


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I sent in a check for all 4 quarters (I just assumed that qtrs 3 and 4 would be the same as 1 and 2, obviously not true) at the end of last week. I just checked, and the payments are posted on the Jersey City Online Tax Account.

http://taxes.cityofjerseycity.com/

Posted on: 12/22 7:06
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