Federal tax law changes expected to take effect for the 2018 tax year have prompted questions about the potential benefits of prepaying state and local taxes. Under current law, payments of state and local taxes may be fully exempt from federal and state income tax. Under the new legislation, which has passed Congress and awaits approval by the President, the exemption would only apply to the first $10,000 of payments each year. The new law does not change tax policies related to returns for the 2017 tax year.
The City of Alexandria accepts prepayment of real estate taxes. A payment made through December 31, 2017, will be applied to the 2018 real estate tax balance if the taxpayer has no other outstanding balances with the City. However, the City is not providing individual advice about the federal tax impact of prepaying local taxes. There may be no benefit of prepayment depending on final interpretation of the new law; how much the taxpayer is likely to owe in 2018; whether the taxpayer takes the new, higher standard federal income tax deduction in 2018; and other factors. The City encourages 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.
Taxpayers who wish to prepay City real estate taxes may estimate their payments based on 2017 tax amounts, but will still be responsible for ensuring payment of actual balances due once bills are prepared in May based on 2018 real estate assessments and the annual tax rate adopted by City Council. Payment in full for the first half of 2018 real estate taxes will be due on or before June 15, 2018. Taxpayers who prepay in 2017 and whose regular real estate tax payments are made by third parties, such as mortgage escrow services, should notify their normal payment providers to avoid duplicate payments in 2018.
The preferred method of prepayment is by check, with “Prepayment” noted in the memo field. For the mailing address, and other ways to pay in person or online, see www.alexandriava.gov/Payments. Note that all payments will be deposited upon receipt even if applied to future balances; the City does not accept payments with future deposit instructions.