Treasury allows Illinois residents to deduct prepaid property taxes

The Treasury Department said this week that residents of Illinois who prepaid property taxes last year should be able to deduct them.

The department issued this clarification in a letter to Rep. Peter Roskam (R-Ill.), a senior member of the House Ways and Means Committee whose district includes suburbs of Chicago.

“This announcement is a win for the thousands of Sixth District residents who stood in line to prepay their property taxes last year,” said Roskam, who is in a competitive reelection race. “As we move forward with an updated new tax code, families in every income bracket will see a tax cut and Illinois residents will see real tax relief.”

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The new tax law, enacted in December, caps the state and local tax deduction at $10,000 starting for the 2018 tax year. As a result, taxpayers in many high-tax states scrambled to prepay their property taxes before the end of 2017 so they could deduct the full amount.

The IRS issued an advisory shortly after the tax law was signed that said people could deduct prepaid 2018 property taxes only if the taxes were both assessed and paid in 2017. 

The guidance created some confusion, including in Illinois. In that state, taxpayers pay property taxes for the previous year, so taxpayers prepaying property taxes at the end of 2017 were prepaying 2017 taxes, not 2018 taxes.

Roskam wrote a letter to the Treasury Department seeking clarification that the IRS advisory did not pertain to prepayments of 2017 property taxes, and the Treasury Department agreed.

Another Illinois Republican being targeted by Democrats in the midterms, Rep. Randy Hultgren, also praised the Treasury Department’s announcement and the new tax law.

“I am very pleased that the IRS clarified this important issue for hardworking families in Illinois who prepaid their property taxes last year,” Hultgren said. “Since the Tax Cuts and Jobs Act took effect on January 1, Illinois individuals, families and small businesses are reaping the benefits of lower tax rates, a doubled standard deduction and a doubled child tax credit.”