Should I pay my 2018 property taxes by December 31?

If you’re like most American homeowners, an envelope recently arrived in your mailbox detailing what to cough up for this year’s property taxes. But the bill comes with a choice: Should you pay this year or in January?

As with many questions, it depends. How you expect your taxable income next year to compare to this year’s is one factor, as is the amount of your property tax.

First of all, the date you pay any property tax, not the date it’s assessed or applied, determines when you can deduct it on your tax return. Pay by Dec. 31 and you can make a deduction on your 2018 tax return.

But if you know you’ll owe more income tax next year, due to increased income or selling assets, then paying in January allows you to take the deduction on your 2019 return, offsetting an otherwise increased tax hit. The converse is also true: if you expect your income to be higher this year than in 2019, paying by Dec. 31 will likely garner a bigger tax break

It’s even possible to hold one year’s tax payment for January and then pay the next year’s in December, creating a tax year with a double deduction. But although this is still allowed, changes to this year’s tax law make that work for fewer people.

That’s because the IRS now caps the annual deduction for property taxes plus state income taxes at $10,000. If your area has high property taxes or state income taxes, the new limit won’t accommodate deducting two years’ tax bills at once.

Most homeowners with steady tax scenarios are best served by simply sticking to the same payment schedule every year. But a bit of forecasting can help determine if December or January is your better bet.