Prepaying some taxes could save you money

For every change in tax law, there are scores of people who want to outrun it and beat the system. Especially when it happens with less than three weeks left in the year.

Since the final federal tax bill appeared on Friday, many people have had questions about prepaying taxes, a wide-ranging strategy that encompasses various efforts to save money by paying some taxes early. It seems counterintuitive, but sometimes if you pay taxes in one year instead of another, you can come out ahead financially. This will depend on your income, the amount of your overall deductions and any changes in tax law.

This year, there is a twist: The authors of the tax bill cut off one prepayment move that many people had hoped to make while leaving at least two other options open.

For people who have money available to prepay their personal taxes, here is a breakdown of the options, according to both the bill itself and staff members from the relevant House and Senate committees.

State and local income taxes

at the end of this year, so as to beat the new $10,000 cap by deducting that much more this year.

Republican taxbill writers read your mind, however, and in the final bill they prohibited taking a deduction this year if you prepay next year’s income taxes.

Property taxes

While the writers of the final bill had the opportunity to prohibit prepayment of local property taxes, they did not do so. So if you can save money on your taxes overall by paying your property taxes this year, when the $10,000 cap is not yet in effect, you might want to seriously consider it.

But before you start lining the money up, check with your local taxing authority about whether it allows prepayment — and how much you can actually pay in advance. There are different rules in different jurisdictions.

Quarterly state income taxes

If you are not a salaried employee or if you have freelance income, you probably make quarterly income-tax payments. If so, your next one is due Jan. 16.

Because that payment is for the fourth quarter of this year (even though you do not have to pay it until 16 days into next year), it is not technically a prepayment if you pay it this year.

So the new bill’s prohibition on prepayment of next year’s state income taxes does not keep you from making that fourth-quarter state income-tax payment on Dec. 31 or before. If you do that and your overall tax situation allows it, you can deduct the payment on your 2017 tax return.