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According to the IRS advisory to tax preparers dated December 27th:

A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

According to my county tax office my property was assessed (and revised) in 2010, and will likely not be reassessed for several years (provided I don't do something to improve it's value).

However, the IRS comment that the "assessment" is generally "when the taxpayer becomes liable" suggests that they (the IRS) are conflating "assessment" with billing or invoicing.

On the one hand, as my property was "assessed" in 2010 - it would appear that I could pay my tax bill which will come to me in March 2018 prior to Dec 31 2017 (effectively prepaying) and use that as a 2017 deduction.

On the other hand if the IRS (sometime in 2018) says 'Oh, we really meant tax billing, not assessment' then that deduction taken in 2017 would fail in audit.

So exactly what does the IRS mean by "assessment"

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3 Answers 3

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Property tax is considered to be assessed when the amount owed is finalized. In Colorado, for example, the mill levy in some counties hasn't been certified yet, so people are making estimated payments.

Historically, these estimated payments haven't been a problem with the IRS, but by their wording these estimated payments don't sound like they would be counted towards 2017. It's unclear if they'll stick to the more rigid interpretation of the wording or if (as long as you only claim the actual assessed amount) they'll allow it.

Contact your county's tax assessor to find out if the assessment is complete and if they accept prepayment (if it even benefits you).

Edit: Went to the assessor's office and learned that our property tax is paid in arrears, so my pre-payment of what is due in 2018 is actually paying what was assessed in 2017, so feeling more confident that the deduction is proper.

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  • Contacted the OH County assessors office, they said my assessment was made in July 2010. Taxes and the invoice derive FROM the assessment (which is actually the market valuation). To further that discussion they said they have a "Board of Assessment Appeals", that board will not entertain discussion of taxes, and will only hear evidence of valuation.
    – BobE
    Commented Dec 28, 2017 at 21:32
  • Yes, they will accept prepayment - however they were quick to point out that it's only prepayment in advance of receiving the actual statement, NOT payment in advance of actual determination of tax owed. (2018 payments are for 2017 tax year)
    – BobE
    Commented Dec 28, 2017 at 21:54
  • @BobE When I went to pay mine I learned that it was paid in arrears as you mention, the clerk seemed confident that the deduction is proper given the IRS wording.
    – Hart CO
    Commented Dec 29, 2017 at 1:20
  • I feel the same, however, remind me, did you actually get an invoice or 'demand for payment' ? user4556274 (below) seems to be suggesting that the IRS requires the taxpayer to have had an "tax imposed or charged". FWIW, I've heard other tax "experts" say that the deductability status will likely end up in a court decision some 2-3 years from now!
    – BobE
    Commented Dec 29, 2017 at 2:09
  • I know the amount due and the date due, but they don't send out the little coupons until later. The notion of it being assessed at the time it's due is contradictory to the notion of a prepayment.
    – Hart CO
    Commented Dec 29, 2017 at 2:28
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From the basic reference site dictionary.com, two common definitions of "assess" are

  1. to estimate officially the value of (property, income, etc.) as a basis for taxation. ...
  2. to impose a tax or other charge on.

It is clear from the two example scenarios given in the advisory, that here the IRS is using the latter definition of assess, and not referring to the irregular valuation of your property (definition 1) which is then used as a basis for the annual determination of your property tax bill (definition 3).

As a sample of the IRS using the word "assess" in this fashion, consider the incidental definition in the Internal Revenue Manual chapter on tax litigation: "Assessment is the statutorily required recording of the tax liability."

As the IRS is not responsible for assessing property taxes, an excerpt from the constitution of a taxing authority: "Section 8. Taxation. All taxes upon real and personal estate, assessed by authority of this State, shall be apportioned and assessed equally according to the just value thereof."

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  • Great answer - good references from IRS - doesn't look 100% concrete, but you appear to have pointed that out well.
    – Grade 'Eh' Bacon
    Commented Dec 28, 2017 at 20:12
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    IMO, this is the real answer to the question—OP is conflating two different uses of "assessment."
    – Kevin
    Commented Dec 28, 2017 at 20:28
  • @Kevin , See my comment to (at) Hart CO's answer above.. Apparently my taxing authority uses definition #1 - hence my conflict. Further more there seems to be an issue of what time period is covered. In my county in Ohio, the tax "invoice" I will receive in March 2018 is for the first half of 2017, the one that I receive in Aug 2018 is for the second half of 2017 . So for example, if I were to sell my house the day after tomorrow, I would be immediately liable for all the 2017 taxes, whether I had been presented an invoice prior to that or not.
    – BobE
    Commented Dec 28, 2017 at 21:47
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A prepayment of anticipated real property taxes that have not been assessed prior to 2018

On the one hand, as my property was "assessed" in 2010

Bolding mine.

When the IRS says "assessment of taxes", they mean "assessment of taxes". You can't just pick something else that has been assessed prior to 2018 and say "Hah! I have a pre-2018 assessment."

How property taxes work is first the government decides what your taxable value is (property assessment), and then decides, based on your taxable value and tax rates, how much you owe (tax assessment). Tax assessment is when the government says you owe a certain amount of money.

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  • very useful to understand that distinction - however I've a followup (that perhaps I'll ask as a separate question: how does the tax assessment work when a seller is closing on a sale? Does the local authority send a tax assessment to the closing officer or to the property owner?
    – BobE
    Commented Jan 3, 2018 at 15:52
  • @accumulation in my taxing jurisdiction property taxes are paid "in arrears" - the tax bill I received in 2017 was for the calendar year 2016. The valuation (the call it "assessment") AND the tax rate AND the liability have all been established PRIOR to the end of the year. The local government "verbally tells me" I owe a certain amount of money at the end of the year, but does not send out an statement or invoice of demand for payment until Feb the following year. So, it's still questionable (to me) why a property tax payment made on Dec 30 2017 would be considered a "prepayment"
    – BobE
    Commented Jan 4, 2018 at 3:31

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