If you make estimated income-tax payments, mailing the fourth-quarter installment by December 31 earns you the deduction in the current year - even if part of the payment is returned to you via a state tax refund the following spring. However, the payment has to be based on a reasonable estimate of your actual state-tax bill. You can't inflate your fourth-quarter payment just to hike the write-off on your federal return.
You may have similar flexibility with state and local property-tax bills. In some areas of the country, these bills are mailed out in the fall, for example, but they don't have to be paid until January of the following year. Beating the deadline by paying before year-end lets you claim the tax savings a year earlier.
Caution: If you are subject to the alternative minimum tax, prepaying taxes may result in no tax advantage. If you are subject to the alternative minimum tax, contact a qualified tax professional to help you determine the best time to pay your taxes.
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