30 Jan Estimated taxes and the new tax law

Q. The new tax law says you cannot prepay income taxes for 2018, but what happens to the estimated income taxes I already paid for 2018? Will my pre-paid estimated taxes apply to taxes due for 2018?
— Taxpayer

A. Prepayment of taxes has been a confusing issue since the new tax plan was passed.

It’s especially painful for many New Jerseyans, who now face a limit of $10,000 for deducting state and local taxes in 2018.

“If you have prepaid your 2018 estimated state income taxes in 2017, the IRS will treat those payments `as if they were made as of the last day of the tax year for which the tax is imposed,’” said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

In other words, Hook said, they will be treated as being paid in 2018 and not 2017.

The amount you paid for 2018 will still apply for 2018, he said. It just won’t be tax deductible on your 2017 income tax return.

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This post was first published in January 2018.