Summit County homeowners rush to prepay property taxes before GOP tax law takes effect
Tax season is still a few months away, but an end-of-year frenzy is taking place at the Summit County treasurer’s office as local property owners try to prepay taxes before new tax rules take effect on Jan. 1 strictly limiting itemized deductions for state and local taxes.
The treasurer expect millions in property tax prepayments by the end of the month.
The stampede to pay property tax is taking effect just as the ink is drying on President Trump’s signature to the GOP-passed tax law, which saw no Democratic support. The new law raises the standard deduction for individuals and couples, but caps itemized deductions for state and local taxes at $10,000. That means that even if a property owner pays much more than that, they can only deduct up to the cap starting on Jan. 1.
The treasurer’s office expects to see over four times the regular number of local property owners trying to prepay their property taxes by the end of the month.
Deputy Treasurer Ryne Scholl said his office saw 277 people pay their property tax last December, and usually takes in about $750,000 in prepaid revenue for the entire month.
The past few days blew those numbers out of the water.
“Yesterday alone, we took in about $1.2 million,” he said. “That doesn’t even include all the checks stacked up that haven’t been processed yet.”
On Wednesday morning, the IRS issued an advisory statement on their website about pre-paying taxes to avoid the itemized deduction limits. “In general,” the advisory read, “whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018.”
County assessor Beverly Breakstone believed those requirements were met for 2017.
“We have assessed property taxes for 2017,” she said, pointing out that the county commissioners certified mill levies on Dec. 12, effectively making the tax rates official. “I do believe that the treasurer has the exact taxes (to) be paid for 2017.”
However, what isn’t clear is whether that assessment is enough for the IRS to determine whether 2017 rules apply.
“The question we’ve been discussing here in the office is whether the definition of an assessment is what we know now, or whether it is only official when (County Treasurer Bill Wallace) sends out the tax statement to taxpayers come January,” Breakstone said.
That would mean that the 2018 rules may apply even to the prepayments, since the assessment will be considered complete in 2018.
Wallace said he had been taking part in the discussion among Colorado treasurers about whether accepting prepayments for 2017 now will be effective, or even legal under federal law.
Wallace said that the emerging consensus among treasurers is that accepting prepayments should be legal. “Colorado statute says we can collect those taxes,” he said.
However, he cautioned that it’s not an official interpretation and nobody has a definitive answer as to which deduction rules will be applied. He is also not sure if the IRS will even accept the postmarks for prepayments as 2017 payments if they are received and processed next month, in 2018.
“We’ll accept the payment, and we’ll post the payment,” he said. “But I don’t work for the IRS, I’m not a tax accountant. I can’t tell you what they’ll wind up doing, or what itemized deduction rules they’ll apply.”
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