PrePaid Local Real Estate Taxes May NOT Be Deductible
On December 27, the Internal Revenue Service (IRS) issued an advisory stating that prepayment of 2018 local real estate taxes may not be deductible on 2017 federal income tax returns. The advisory follows the City of Alexandria’s December 21 announcement that while the City accepts prepayments, there may be no benefit of prepayment depending on a variety of factors. The City continues to encourage taxpayers who are considering prepayment to consult qualified tax professionals before deciding whether to prepay and determining the date by which payment must be sent or received.
The IRS advisory clarifies that “a prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.” State law and the City Charter provide that all real property must be assessed at fair market value as of January 1 each year, and the amount of the real estate tax cannot be assessed until the tax rate is set by City Council in May of each year. Consequently, there is no legal or practical way for 2018 Alexandria property values or real estate taxes to be assessed in 2017.
More than 650 Alexandria taxpayers have made apparent prepayments of more than $6 million from December 1 through December 27. Customers who made prepayments may request refunds by contacting the City’s Treasury Division as indicated below, and including the taxpayer’s name, the address of the applicable property, the type of tax prepaid (real estate or personal property), the amount of the prepayment, the date of the prepayment, and the method of prepayment (in-person, by mail, online, or dropbox). Given the unprecedented potential for refund requests, refunds may take up to six weeks to process. Any prepayments not requested to be refunded will be applied to future 2018 balances if no other outstanding balances are due to the City.
For refund requests, please contact the City’s Treasury Division at firstname.lastname@example.org or 703.746.3902, Option 8. For additional information about the real estate tax, please visit www.alexandriava.gov/RealEstateTax.