Time is short--really short--so I'll try to keep this as quick as I can. If you make a decent amount of money and own real estate (or aspire to), and if you live in one of America's higher tax states, the sweeping tax law that President Trump signed Friday, just before the Christmas weekend, could include a giant lump of coal for you.

That's because, while a majority of Americans should see at least a short-term tax break from the new law, it also contains a provision that could well result in a big net tax increase for at least thousands of U.S. taxpayers. If it affects you and you want to try to offset it, you have only a few days to act.

Below, we'll explain the new tax law's land mine and what you might be able to do about it, at least for 2018. Unfortunately, there's a lot of uncertainty about this law, since it was enacted at the last minute, only days before the end of the year. In fact, even as I was writing this article on Wednesday evening, the IRS issued new "guidance" that only created more angst and confusion.

Here's what we know, and what some people are advising you do.

The $10,000 cap

The issue is that the new tax law contains a $10,000 cap on the total amount anyone can deduct from federal taxable income for paying state and local taxes. Up until now, there's been no cap. Many upper middle class people (say, with incomes of $150,000 or more) pay much more than $10,000 a year in state and local taxes.

As an example, the average taxpayer who makes more than $200,000 a year in  Minnesota takes a $46,591 state and local tax deduction--or at least, they used to. Now, they'll be limited to $10,000.

It's even worse for people in New York and California, where the average deductions in this profile are $84,964 and $64,771 respectively. (This data analysis comes from The New York Times.) While some people may choose to take the standard deduction instead, that's capped at $25,000--and it replaces all deductions, including things like charitable giving, too.

Tax professionals have been rushing to find ways to limit their clients' exposure, and their best bet has been to encourage clients to consider paying their 2018 property taxes now, in 2017, before the cap kicks in. Thousands of people have been lining up at local tax offices to do so, according to news reports.

But it's not quite that simple, as we will see below. The situation is made even trickier by the fact that the law was enacted with literally only four business days left in 2017, when much of the United States is on vacation. There just hasn't been enough time for tax pros to study it and communicate with the IRS and their clients--let along for many ordinary taxpayers to act with certainty.

The potential 1-year pre-payment trick

The tax bill was passed with only Republican support in Congress, and you'll notice that the states whose taxpayers are most adversely affected by this provision are the ones that tend to vote overwhelmingly for Democrats. 

That makes the whole thing a giant political football, and it raises the possibility that if Democrats recapture the White House and Congress in 2020, eliminating the $10,000 cap could be a priority. 

But for the next few years, at least, it will be the law. Thus, many tax professionals started earlier this month advising clients to think about prepaying 2018 state and local taxes before the end of the year, while the old rules still apply.  

Republicans in Congress anticipated this strategy, at least in part, as Michael E Williams, a partner in the New York firm of Schulman, Lobel, Zand, Katzen, Williams & Blackman, LLP pointed out to me. While his firm is advising clients to consider prepayment under certain circumstances, he said, a Congressional committee report "states that one cannot prepay 2018 personal income tax in 2017 and expect a tax deduction."

However, that report didn't mention the idea of prepaying local property taxes. As a result, that's where most accountants and tax professionals are focusing their advice.

Prepaying property taxes 

So, should you prepay your property taxes, too? It seems like a good idea in the abstract, but there are at least two wrinkles involved. The unfortunate net result is that you'll almost certainly have to make a fast decision based on incomplete information.

Here are the two wrinkles: First, it's possible that by prepaying your 2018 property taxes during 2017, you might accidentally wipe out your entire expected windfall as a result of the alternative minimum tax.

Second, there's the IRS guidance that came out with literally less than 72 hours left during the last business days of 2017--literally while I was writing this article tonight. In short, it says you can only prepay property taxes and take a deduction in 2017, to the extent that your city or town has already assessed those taxes.

Just to make this even more fun, the definition of an "assessment" is a tricky one, and it varies by state. And with only days or maybe hours left in the year, some states and local governments are trying to pass laws or guidance quickly that would specifically allow prepayment.

There's an obvious third wrinkle, too, which is that you have to have the available cash to cover your 2018 property taxes now, in order to pay them. It could make sense to borrow to make the payment if necessary--but with all the uncertainty, that's a really hard thing to suggest.

Putting my money where my mouth is

Before acting like this, ideally you'd want to estimate your final total 2017 income, and figure out at least roughly what your taxes would be in 2017 and 2018 depending on when you pay your 2018 local property taxes,  

But you probably won't have all the information you'll need to make these determinations until at least January 2018--by which time it would obviously be too late to make a payment in 2017. And that doesn't even include the future legal arguments we can expect about whether many taxpayers' local tax prepayments will count, according to the IRS.

Besides, at this late date, could you even get an appointment with an accountant or tax preparer to talk it all through? It all means that many people will wind up having to make an important financial decision here--and do it very quickly, and based on incomplete information.

Obviously, I am in no position to offer tax advice. For one thing, I have no way of knowing your individual situation, even if I thought I had a real handle on this whole issue (which I don't, due to the last-minute uncertainty.) However, I can share what I'm doing personally, since I happen to live in one of these high-tax states, and I am one of the people who could face a tax increase next year.

I spent a few hours this evening trying to roughly estimate my 2017 taxes, both with and without a property tax prepayment. Of course, I don't have all of the information I really yet--and also, I was using 2016 tax software (all I had available), with the hope that there isn't some other hiccup in tax law between 2016 and 2017 that might significantly affect me.

That said, by prepaying half of my 2018 local property taxes (which is all that's been assessed in my community), I think I'm likely to come out ahead. I'll probably make a final decision about whether to prepay at the last minute: tomorrow, December 29.* 

I figure that if our representatives in Washington rushed at the last minute to enact the most impactful tax law in 30 years, and if the IRS is issuing last-minute guidance like this--then I can wait until the bitter end to decide as well.

*Could you technically make a payment on Saturday or Sunday, December 30 or 31, when I'd assume your local tax office is closed, and still have it count for 2017 in the IRS's eyes? I don't know, but given all the last-minute uncertainty here, I'd hate to risk the IRS deciding next year that a payment made over the last weekend of 2017 would be applied on January 2, 2018--when the local tax offices reopen. Tax professionals, please let us know your thoughts in the comments!

Published on: Dec 28, 2017
Like this column? Sign up to subscribe to email alerts and you'll never miss a post.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.