Message Font: Serif | Sans-Serif
No. of Recommendations: 0
mahanfool: My question is what difference will it make if I delay it till 15th April'01?
At that time, can I claim it as a deduction on my federal tax return for year 2000?

JAFO31: Most individuals are cash basis taxpayers; assuming that you are a cash basis taxpayer, you cannot [generally] deduct expenses on your year 2000 tax return expenses that were not actually paid in year 2000 ... Thus, payments for state and local taxes made in April 2001 would probably not be deductible on your year 2000 return.

JAFO31's advice is right on the money. One word of caution regarding pre-paying state and local taxes: if you itemize your deductions for a given tax year AND get a refund of state or local taxes for that year, you may be double-taxed - to a limited extent - on the refund amount. This is a function of that amount being included in income "above the line" (or, on the first page of your tax return) in both the first year and in the year the refund is received (usually the next year) but the deduction for this amount being taken "below the line" (or, on the second page on your tax return). There are a number of calculations that are based on the "above the line" income number (e.g., the 7.5% floor for medical expenses that can be deducted is based on 7.5% of your above the line income). Therefore, getting an itemized (below the line) deduction for an amount does not necessarily offset the tax cost of having earned the income "above the line" in the first place.

This is probably a lot more detail than anyone is interested in, but it's a pet peeve of mine. I would be happy to elaborate or try and be clearer if you are interested.

Best of luck and happy NY,

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.