As Congress approved a massive tax reform bill this week, phones began ringing in Howard County government offices.
By the dozens, then the hundreds, residents wanted to know: Can I pay next year’s property tax bill now?
“Our call volume has increased dramatically,” said Stanley Milesky, director of the county’s Office of Finance. “This appears to be the only subject that people are talking about.”
The complex federal bill, which President Donald Trump signed into law Friday, has a provision limiting deductions that taxpayers take for paying state and local property taxes to $10,000.
That deduction is popular in states such as Maryland with high incomes, property values and local tax rates. In Maryland, 46 percent of taxpayers currently take the deduction, for an average of $13,000, according to IRS data.
Now, some Marylanders are wondering if it might be wise to squeeze in 2018 property tax payments — which would normally be due next fall — before the end of this calendar year, so that those payments can fully be deducted on 2017 tax returns instead of facing a possible change next year.
Many counties will take payments for next year’s taxes early, though officials caution that the strategy isn’t guaranteed to reap the financial benefit taxpayers seek.
That’s because the IRS will spend months writing regulations to cover details of how the new tax law is carried out, Milesky said. There’s a chance the early property tax payments won’t be allowed — although taxpayers won’t know for months.
Greg Horning of SC&H Group, a Sparks-based accounting and financial services consulting firm, has been busy fielding calls this week from clients about property taxes.
“We’re getting questions on this issue,” he said. “It’s a little complicated.”
Horning agreed there’s no guarantee that paying property taxes early will benefit clients but said that there’s little risk to the maneuver.
Language in the federal bill specifically prohibits paying state and local income taxes early for tax benefits — but the bill is silent on paying local property taxes early, he said. That could be intentional, or could be an oversight Congress or the IRS could address later, Horning said.
Horning said even if early property tax payments don’t end up being a tax advantage, the downside would simply be that the taxpayer loses use of that money for several months by paying now instead of next September.
He said taxpayers who might consider paying property taxes early only include those who itemize deductions on their tax returns, and those who aren’t subject to the alternative minimum tax.
“We will be working straight through New Year’s Eve to help our clients evaluate how to react,” he said.
Local government officials say they have been careful to tell callers about their options without offering tax advice.
“People are seeking assurance from me and my customer service people about issues that we have no information to provide, and really no experience to guide,” Milesky said.
Frank C. Derr, Baltimore’s deputy chief of revenue collections, said the city also has received calls and emails from people asking about paying property taxes early. In a statement, he advised people to check with a tax professional first.
“The city cannot assure that you will receive the tax benefit you seek by making a pre-payment,” he said.
Baltimore County has seen dozens of property owners come to county offices to pay next year’s property taxes now, said county spokeswoman Ellen Kobler. The county can accept them, but she noted one caveat: To pay next year’s property tax bill, the current year’s bill has to be paid first.
Anne Arundel and Harford counties also accept property taxes early and have been getting inquiries, officials said.
In counties that accept early payments, taxpayers should be sure to note that their payment is for the Fiscal Year 2019 property taxes — otherwise the money might end up being sent back as an overpayment for the current year’s property taxes.
Milesky noted that paying ahead of time means a property owner might not make the exact correct payment, since home assessments or property taxes might change. Property owners would have to make up any shortfalls later.
Not all jurisdictions accept early property tax payments.
Carroll County cannot accept early payments. State law allows counties to accept tax payments early if they choose, but Carroll officials never elected to enact it, according to county Comptroller Robert M. Burk.
Montgomery County also does not. Members of the Montgomery County Council this week discussed passing legislation that would enable the county to accept early tax payments, but there was one problem: The council is in recess until January.
County administration spokesman Patrick Lacefield said that before setting up a program to accept payments, the administration sought assurances the council would pass the legislation when it returns in the new year. But council members decided Thursday that they didn’t want to move forward.
Councilman Roger Berliner had supported the move, saying he thought it was a good idea to offer at least an option to help Montgomery taxpayers.
“This tax bill is terrible for Montgomery County residents … so if there was something we could do in the short term to help them in a modest way, I thought we should explore that fully,” he said.
Berliner said his council colleagues had questions about whether pre-payments would reduce residents’ adjusted gross income — and thus reduce the income tax they pay to the county. They also questioned if it would cost the county money to set up a pre-payment system.
Berliner said there was no time for council members to run the numbers and do a thorough analysis.
“It was a bridge too far, too fast,” he said.
Pre-paying next year’s property taxes
Property owners with questions about pre-paying next year’s property taxes can contact their local government.
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