GREENFIELD — Tax collectors in communities across the country are seeing a surge in property tax prepayments before 2018 from residents looking to cash in — for one last year — on a deduction that the coming tax overhaul will limit.
Homeowners in affluent towns across the United States are queuing up outside their local tax offices in the days after the Republican-led Congress approved the most sweeping tax overhaul in three decades, according to The Associated Press.
The new law impose a $10,000 limit on the combined sum of property and state and local income taxes that a household could deduct. The $10,000 cap will help pay for corporate and personal tax cuts totaling $1.5 trillion over the next decade, AP reports. The changes go into effect Jan. 1.
Hancock County’s treasurer said her office has fielded phone calls from residents wanting information on how to pay their property taxes early, and about 30 homeowners have visited the courthouse annex in the last week to make an estimated early payment.
That’s far more than the one or two people county treasurer Janice Silvey typically sees coming to settle their bills months ahead of time, she said.
Locally, residents can pay early an amount that’s no more than what their total tax bill was for the previous year, Silvey said. So, anyone wanting to pay their 2018 property taxes before officially ringing in the New Year is limited to whatever they paid in property taxes in 2016, she said.
It’s an estimated amount, and the homeowner will receive a rebate or a bill if their early payment exceeded or fell short of what they actually owe for 2018, she said.
But Silvey and some local financial advisers and tax associates admit they don’t believe filing early will actually benefit Hancock County residents. The property taxes and average income levels locally are too low to see a major impact, they say.
“I hope it helps them,” Silvey said with a laugh, “I’m just not sure it will.”
Since a national income tax began more than 100 years ago, people have been allowed to deduct from their income the amount they’ve paid for state and local taxes.
But under the tax legislation President Donald Trump signed into law last week, there’s a $10,000 cap on the deductions. That’s going to hit hard in states such as California, Connecticut, New York and New Jersey — states where the average state and local deductions in 2015 all topped $17,000.
Roughly a third of American taxpayers have enough expenses to itemize their deductions, and nearly all who do so deduct their state, local and property taxes, AP reports.
The Republican tax bill nearly doubles — to $24,000 — a family’s standard deduction, which goes to taxpayers who don’t itemize their deductions. So there would automatically be fewer people who would deduct their state and local taxes, the AP reports. But in addition, many households in high-tax states could no longer itemize their deductions because of the new cap on state and local taxes.
It’s not clear what deductions the IRS will accept in the coming year. The new law specifically bars taking deductions for income taxes paid ahead of time, but it is silent on prepaid local property taxes.
Chris Ogles, a tax associate at the H&R Block office in downtown Greenfield, said he hasn’t gotten phone calls from clients seeking advice on whether to pay their property taxes early.
But he’d advise against it, he said.
In Hancock County, the median property tax payment is around $1,400, according to the Tax Foundation, an organization that tracks property tax data nationwide.
This means the majority of residents will still fall below the new cap, Ogles said.
And paying property taxes early is an expensive undertaking, Ogles said. Anyone looking to pay ahead of time and in a lump sum would have to have thousands of dollars in a bank account just waiting to be spent, he said.
“Most people don’t have that, especially right after Christmas,” he said.
The Associated Press contributed to this report.