As I'm sure some of you do, we pay our property taxes on either 12/31 or 1/31 depending on which year we want to deduct the taxes. We are 99% certain that our income will be higher in 2018, so we'd prefer to postpone the deduction until 2018 (just like we did last year, paid 2016 taxes in late January 2017, so we already have a deduction for tax year 2017). Am I understanding the proposed tax bill would allow property tax deductions up to $10,000 for 2018? Are we safe to postpone until January with reasonable certainty that we can maintain the property tax deduction next year?

Bass is absolutely correct, especially if your property taxes in a single year are in excess of 10k. hopefully we see a compromise where this increases to around 15k at a minimum.

This makes sense.

What about the Interest deduction. I hear it goes from $1.1M to $500k valued homes. Is this an all or nothing? Meaning your house cost $501k you can't defuct the interest?

If you have a $600k house how do they know what interest is paid on the first $500k?

It is the same on the $1M. The calculation would roughly be 500k/average balance x interest paid.

So basically if your avg balance for a year is 750k and the total interest paid is 30k, your deduction would be
500k/750k x 30k = 20k deduction

I'm looking forward to this new calculation. I feel like my taxes are already more simple to do.

Quito, Just to clarify the limitation is on the average balance of the outstanding mortgage over the year, not the home value.

erin2003 said:

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Quito, Just to clarify the limitation is on the average balance of the outstanding mortgage over the year, not the home value.

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I understand that.

Just curious how you know what portion of interest is paid on $500k,

For instance, If you have a $750k mortgage and pay interest on $750k in the first year...how do you determine what was paid on $500k? What about 5 years later when you now have a $600k mortgage?

Read Big Puma's post. You take 500,000 divided by the average balance (beginning balance + ending balance divided by 2) and that gives the proportion of interest you are allowed to deduct of your total interest paid.

So if your 1098 shows:
Beginning Balance: 775,000
Ending balance: 725,000
Interest paid: 30,000

You would take 775,000 + 725,000 = 1,500,000/2 = 750,000 average balance for the year
500,000/750,000= 66.66667% of the total interest paid is deductible
.66667*30,000 = 20,000 deductible interest

If your 1098 later shows:
Beginning: 625,000
Ending: 575,000
Interest paid: 24,000

You'd have 625,000 + 575,000 = 1,200,000/2 = 600,000 average balance
500,000/600,000 = 83.3333% of the total interest paid is deductible
24,000 * .8333333 = 20,000 interest is deductible

Easier way is to assume you have a fixed 500,000 mortgage for the whole year and then multiply that by your interest rate. That's how much interest you'd pay if the mortgage stayed at 500,000 all year. This only works if your balance stays above the limit the entire year.

Wouldn't it be better to pay property taxes this year no matter what? Most people will have a lower tax rate next year vs this year, so the write off this year helps more.

Also, if someone was to double up on their house taxes (pay 6k in Jan 18 and 6k in Dec 18), are they limited to the 10k vs 12?

Not necessarily. Not all situations are equal. Someone not itemizing in 2017 but probably itemizing in 2018 (due to income thresholds and the pease limitations) should just pay in January and not double up anymore if their taxes are in excess of 12k.

As written limitation is 10k.

The big question now is if this **** show passes.