If you recall, many homeowners made a mad dash by the end of last year to pre-pay the 2018 taxes . Homeowners across the nation were rushing to prepay their property taxes for 2018 before the Republican tax law became effective Jan. 1 and effectively raised the levy on higher-end homes. The new legislation, which President Donald Trump signed into law now caps at $10,000, the amount of state and local taxes that filers can deduct from their federal tax bill. That means those whose tax bills regularly exceed that amount could benefit by paying more taxes in 2017, when the deduction had no limit.
So now the question is, if seller has pre-paid their taxes the buyer will be fully responsible to pay the seller back for the taxes they pre-paid. This is in addition to a buyer paying taxes due at closing and is escrowing . Hypothetically, if a seller paid a year’s worth of taxes and if they were selling by June …that’s 6 months a buyer would have to reimburse. If the annual taxes are 12k, that’s an additional 6k that a buyer would have to pay in addition to his or her costs.
The challenge is, this will come up late in the game when title is ordered or the title company calls the town to verify what has been paid by the seller. (this is usually done at the end near closing).
Please keep this in mind if you are considering selling your home in 2018 and have pre-paid your 2018 taxes in 2017.