Some homeowners see prepaying property taxes as way to save this year and next

Some homeowners see prepaying property taxes as way to save this year and next

FAIRFAX, Va. — Thousands of homeowners in high-tax states are standing in line this week to grab hold of a chance to pay their property taxes early, a move that they hope will lower their 2017 federal tax bills and still allow them to take advantage of 2018’s tax cut.

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But not only taxpayers in coastal states who expect to hit or exceed 2018’s $10,000 cap for deducting property and state and local income taxes can benefit by prepaying their house taxes.

Married homeowners with children who had been using their mortgage interest and property taxes to best the $12,700 standard deduction may find that itemizing won’t be their best deal in 2018 because the new tax law almost doubles their standard deduction to $24,000 and eliminates personal and dependent exemptions. Singles and heads of households will see a similar pull toward using the standard deduction.

“By prepaying, we will save roughly $4,000 next year,” Julia Colby of Alexandria, Va., said Wednesday as a line snaked back from the payment counter of Fairfax County’s Department of Tax Administration. “My husband did a little quick math this morning, and he said, ‘Yes, it’s worth it. Go do it.’ “

More than two-thirds of all taxpayers already have been using the standard deduction under the old tax laws, according to the nonpartisan Tax Foundation. That percentage decreases as income increases.

So for those who itemize or think they might, time is running out.

In previous years, if taxpayers who itemized doubled up on property-tax payments in one year, they would have no property taxes to deduct the next year. Some families, such as those who have paid off their homes, would maximize deductions one year and file the short form the next to take advantage of both methods.

Now many want to push as many deductions into the next three days as possible while trying to tiptoe around the alternative minimum tax.

“We believe that the IRS will require the funds to be taken out of your account this calendar year,” said E. Scott Sizemore, director of the revenue collection division of the Fairfax County’s tax department.

So his offices are staying open later each evening but won’t be open on the weekend before New Year’s Day when banks will be closed — or already have their time stamps on transactions moved up to Jan. 2.

New Jersey Gov. Chris Christie said he believes that the feds will be more forgiving of taxpayers’ intentions and issued an executive order Wednesday requiring towns to accept prepayments through Dec. 31. Some county tax offices in New York will open Saturday to accept the payments and are allowing online and credit-card transactions.

Not all cities and counties allow homeowners to pay taxes that haven’t been levied yet. In California and Wisconsin, homeowners can’t prepay tax bills that won’t show up until December 2018; they can pay 2017 taxes now that generally would be due in 2018.

Congress passed the more than 500-page tax-cut legislation Dec. 20, President Trump signed it Friday and it’s effective Jan. 1. But the IRS has not had a chance to create the regulations and new forms that can help taxpayers understand how it will work best in individual cases.

So those who can afford to write a check now for several thousands of dollars are seizing on something they can understand and hoping it works: Being able to deduct double the amount of property taxes in one year might help them, but only for this year.

The day after Christmas, more than 2,000 people waited in line in Fairfax County or used the tax department’s drop boxes, and that is in addition to about 1,400 people who already were enrolled in the county’s prepayment program, Sizemore said.

“Everybody is trying to do what they think is the right thing to do,” said Sizemore, who made it clear that his department cannot offer tax advice. “And we’re waiting for better guidance from the federal government.”

In northern New Jersey, half of the taxpayers in the state’s most populous county, Bergen, already pay more than $10,000 just in property taxes each year. In Tenafly, N.J., where the average borough home is assessed at $800,000, homeowners pay nearly $20,000 in annual property taxes, and a similar situation holds true at the Jersey Shore, according to New Jersey’s Department of Community Affairs.

“Tenafly is accepting prepayment,” Mayor Peter Ruskin said. “However, our recommendation is that you check with your accountant because, for some people, there may not be any benefit to doing so. It all depends on your tax situation.”

Taxpayers need time to understand the implications of the new tax law but don’t have that time — at least on taking action to pull as many itemized deductions into this year — said Ron Youngs of Clifton, Va. He wishes he could have until April 15 to figure it all out as he does with IRA contributions because he’s not quite sure whether he’ll be better or worse off under the new law.

Still some in line in Fairfax County were practically jubilant about paying their tax bills.

“Even if you’re in the 15% tax bracket, it’s a tremendous return on your investment,” said Mark Libera of Reston, Va. “Where else can you get a 45% return?”

 

Source by usatoday..

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