Author Topic: Property Tax Deduction Shenanigans  (Read 1363 times)

ksaleh

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Property Tax Deduction Shenanigans
« on: March 15, 2013, 09:32:01 PM »
Hey Guys,

I a quest for a home loan, a question came up about whether or not we would want property taxes to be escrowed or not. The loan officer told me that it didn't really matter one way or another.

My thinking for wanting to handle it myself was this:

We normally take the standard deduction bc other than a few charitable contributions, we don't really have any deduction as renters. Once we purchase a home, I was thinking that it would be worthwhile to pay property taxes twice in the same calender year (like January and then December for next years) and then itemize that year. This way, we would be itemizing every other year with a very nice deduction, and then just taking the standard deduction every other year.

Worthwhile strategy to consider, or a waste of energy to save a few bucks?

tj

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Re: Property Tax Deduction Shenanigans
« Reply #1 on: March 15, 2013, 11:39:16 PM »
Only you can decide if it's worth it, but is it even possible? In my county, taxes are due in November and March. If you were to pay the portion due in November in January, there's a late penalty.

arebelspy

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Re: Property Tax Deduction Shenanigans
« Reply #2 on: March 15, 2013, 11:47:00 PM »
Only you can decide if it's worth it, but is it even possible? In my county, taxes are due in November and March. If you were to pay the portion due in November in January, there's a late penalty.

Then you just prepay the next year's taxes. 

You can at least do 1 1/2 payments that way easily.

I have no idea if this would work or is worth it in your situation, but it seems possible at least.

Do you have an accountant to consult?
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tj

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Re: Property Tax Deduction Shenanigans
« Reply #3 on: March 15, 2013, 11:55:44 PM »
Only you can decide if it's worth it, but is it even possible? In my county, taxes are due in November and March. If you were to pay the portion due in November in January, there's a late penalty.

Then you just prepay the next year's taxes. 

You can at least do 1 1/2 payments that way easily.

I have no idea if this would work or is worth it in your situation, but it seems possible at least.

Do you have an accountant to consult?

As far as I know, the county doesn't accept payments before you get the bill. But yes you can do 3 payments one year and 1 the next.

I'm over the standard because of state taxes regardless, so it doesn't really make a difference to me...unless I anticipate a year of lower income.


michelle

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Re: Property Tax Deduction Shenanigans
« Reply #4 on: March 16, 2013, 07:51:05 PM »
In TX we get our tax bill in November. It's not due until 1/31 of the next year. So you could pay 2 years in 1 year taking standard deduction every other year. Very common strategy for those with paid off homes and minimal charitable contributions.

Seeking the Brass Ring

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Re: Property Tax Deduction Shenanigans
« Reply #5 on: March 17, 2013, 08:01:43 AM »
I'd say as long as you have the discipline to save for the taxes yourself you should not escrow the taxes.  My former bank was playing a lot of games with our escrow account and kept increasing the account minimum until we had more than 3 months worth of payments in the account even after paying out the previous years taxes.  In my area of the country this meant that they had more than $2000 of my money that was not earning any interest and I could not do anything else with.  I've since divorced myself from this bank and gone with a local credit union. 

Rural

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Re: Property Tax Deduction Shenanigans
« Reply #6 on: March 17, 2013, 10:06:42 AM »
On a related note, two years of my property taxes do not begin to approach the standard deduction. Do you have any option to buy in a low COL/low tax state?

clutchy

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Re: Property Tax Deduction Shenanigans
« Reply #7 on: March 17, 2013, 01:00:21 PM »
you're just advancing payments.  You'll keep doing that until the end so with prop tax that means till your dead and then it won't matter.

So yes Pay 2 in one year and continue to pay 2 every year.

Also if you want you can prepay your January mortgage payment at the end of December.  I've done that 3 years running but once you do it you won't ever want to go back.

HawkeyeNFO

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Re: Property Tax Deduction Shenanigans
« Reply #8 on: April 24, 2013, 07:42:32 AM »
Pay it yourself.  Don't let the bank have control of this.

I do it myself when I can, and have taken the opportunities to get rebates on 5% cash back credit cards in the past.  The every other year game looks good too.  At the end of the day, I simply like to have control of my property and financial items.

arebelspy

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Re: Property Tax Deduction Shenanigans
« Reply #9 on: April 24, 2013, 07:50:35 AM »
Pay it yourself.  Don't let the bank have control of this.

I do it myself when I can, and have taken the opportunities to get rebates on 5% cash back credit cards in the past.  The every other year game looks good too.  At the end of the day, I simply like to have control of my property and financial items.

I love having it escrow'd.  Less things to keep track of, and when you have a half dozen+ properties, that's not a small thing.

My first property, which we did not escrow the taxes and insurance, has to extra bills yearly due to that (and only because we pay the whole thing yearly- they could be monthly, or quarterly).  What a hassle.  I can't imagine doing that so many more times.

I'd pay 10 years in advance, if I could, and couldn't escrow them.

To each his own.
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icefr

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Re: Property Tax Deduction Shenanigans
« Reply #10 on: April 24, 2013, 09:16:06 PM »
My first property, which we did not escrow the taxes and insurance, has to extra bills yearly due to that (and only because we pay the whole thing yearly- they could be monthly, or quarterly).  What a hassle.  I can't imagine doing that so many more times.

When I get the bill in the mail in mid-February, I go into my online bill pay and set it up to pay the first half around April 15th and the other half around October 15th and then I'm done paying it for the year. Just because it has to be paid in two installments doesn't mean I need to do twice the work.

arebelspy

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Re: Property Tax Deduction Shenanigans
« Reply #11 on: April 25, 2013, 06:58:43 AM »
When I get the bill in the mail in mid-February, I go into my online bill pay and set it up to pay the first half around April 15th and the other half around October 15th and then I'm done paying it for the year. Just because it has to be paid in two installments doesn't mean I need to do twice the work.

Yeah, having to do that is the hassle I was referring to.  I also only do it once (because I just pay the whole year, instead of six months at a time), but I also have to do that once a year for the insurance.  I don't want to do that for a bunch of properties. 
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