Many Americans are rushing to prepay their taxes before the major tax overhaul that was signed into law last week takes effect. At heart of the issue is a major tenet of the law that overhauls a tax break that allows homeowners to deduct local and state taxes paid that year.
Under the old system, homeowners were allowed to deduct real estate or property taxes from their federal tax bill. It also let individuals living in certain states deduct things like sales taxes. Under the new legislation that benefit is capped at $10,000. But taxpayers may have a way to save on their upcoming tax bill because some states and localities allow people to prepay their state and local taxes. If they do so, individuals could theoretically deduct those payments from their federal returns filed for 2017 in April 2018.