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Illinois taxpayers who prepaid property taxes can take IRS deduction

The headquarters of the Internal Revenue Service in Washington. | J. David Ake/AP file photo

WASHINGTON — Rep. Peter Roskam, R-Ill., said on Wednesday that the IRS will allow Illinoisans who prepaid local property taxes due in 2018 to deduct the extra payment in order to cut their federal tax bill.

“Illinois taxpayers will be allowed to deduct their prepaid property taxes,” Roskam said in a statement about what will be a one-time tax break.

Roskam, a member of the House Ways and Means Committee, asked the IRS and the Treasury Department for guidance in the wake of the new tax rules President Donald Trump signed into law last year. The Ways and Means panel has oversight over the IRS.

At issue: Under the old rules, taxpayers can take unlimited deductions for state and local taxes and property taxes. Under a very controversial new provision, starting with taxes paid in April 2019, there will be a $10,000 cap for these deductions.

Across the nation — and in Illinois — property owners rushed last December to prepay property taxes not due until 2018 in order to avoid the $10,000 cap for one last time. But it was not clear late last year whether the IRS would allow the gambit.

“As a general matter, taxpayers are permitted to deduct 2017 property taxes that were both paid and imposed in 2017,” Drew Maloney, the Treasury Department Legislative Affairs undersecretary wrote in a March 27 letter to Roskam.

Under the Illinois property tax system, taxes due in 2018 are based on taxes levied in 2017.

Federal tax returns are due on April 17, with taxpayers in 2018 getting two extra days. That’s because the usual April 15 deadline lands on a Sunday, and Monday is the Emancipation Day holiday observed in the District of Columbia, which pushes back the due date for the entire nation.