Due to the pending tax law changes in the US, prepayment of 2018 property taxes has been a popular topic of discussion in recent days. But can Disney Vacation Club owners benefit from paying their 2018 dues now?
The new Republican tax bill signed into law by President Trump will place new limits on the deductibility of property taxes. Effective January 1, 2018, deductions for state and local taxes, including property taxes, are capped at $10,000 per year. This has prompted many taxpayers to attempt pre-payment of their 2018 taxes during the 2017 calendar year in order to avoid the new cap.
However, new guidance from the Internal Revenue Service casts doubt on whether this would work with Disney Vacation Club property taxes. Per an IRS Advisory issued on December 27, 2017, 2018 taxes must be both assessed and paid in 2017 in order to qualify for a deduction on this year's return:
"A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed."
Disney Vacation Club property tax collections (ad valorem taxes) are based upon estimates rather than the actual assessment, seemingly disqualifying them under this interpretation.
Taxes for the 2017 year were estimated prior to the issuance of annual dues statements in November 2016 with the total amount billed in either 12 monthly installments or payable in full by January 15, 2017. However, funds were merely placed into an escrow account pending issuance of the actual property tax assessment for the year.
For 2017, the final assessment was not issued until November 1, 2017. Details on the 2017 assessment can be found in this earlier story by Wil Lovato.
2017 tax estimates are then reconciled against the assessments, with details posted to owners' accounts on DVCMember.com. 2017 DVC property taxes paid in 2017 are typically deductible for owners who itemize, subject to other rules and restrictions.
While Disney Vacation Club has estimated the ad valorem taxes for 2018, assessments will not be available until much later in the year. This would seem to make any 2018 DVC tax payments ineligible for a deduction, even if paid during the 2017 calendar year.
There is no harm in paying 2018 annual dues before the end of 2017, but consult with a tax professional before claiming a deduction on 2017 returns. Tax deductions are likely to face increased scrutiny by the IRS due to pending changes in the tax law.
Note that this should not be considered tax advice; owners are advised to contact their tax professional for personal guidance.
Here are the important dates and deadlines for the Orange County (FL) taxing authorities from the 2017 calendar. In all likelihood, Orange County will use similar dates for the 2018 process. (OC = Orange County; OCPA = Orange County Property Appraiser; TRIM = Truth in Millage)
1 · The “Best Estimate of Taxable Value” letters for 2017 distributed to all taxing authorities
15 · System cut-off for non-OCPA users except OC special taxing & mandatory refuse – 5pm
16 · System cut-off for OC special taxing & mandatory refuse, 2017 Preliminary Tax Roll – 12 noon
20 · Delivery of DR420’s with preliminary tax roll values and supporting docs to all taxing authorities 26 · OCPA system active at 8am for all non-OCPA users
3 · Deadline for cities/CDD’s/drainage districts to provide all special assessment information for TRIM’s
27 · System cut-off for non-OCPA users except OC special taxing & mandatory refuse – 5pm
28 · System cut-off for OC special taxing & mandatory refuse, 2017 TRIM Notices, 12 noon
28 · Proposed 2017 millage rates, DR420’s and supporting docs, due to Property Appraiser by 12 noon
15 · “Notice of Proposed Property Taxes” in the mail to all taxpayers
5 · First day a hearing to adopt a tentative budget may be held
15 · Deadline for annexations to OCPA for processing which qualify for 2017 tax roll
15 · Deadline for taxing authorities to certify final non-ad valorem assessment roll to Property Appraiser
18 · Deadline to file a petition to the Value Adjustment Board
21 · System cut-off for tax bills for non-OCPA users except OC special taxing & mandatory refuse – 5pm
22 · System cut-off for tax bills for OC special taxing & mandatory refuse – 12 noon
TBD · Value Adjustment Board certifies 2017 Orange County final tax roll
2 · Delivery of DR422’s with final tax roll values and supporting docs to all taxing authorities
5 · Deadline to return DR422’s to Property Appraiser with final millage rate – 12 noon
13 · Property Appraiser certifies 2017 Orange County final tax roll to the Tax Collector for collection of taxes
1 · Tax bills delivered to all property owners by Tax Collector