2018-01-11 / News

Law change causes Jamestowners to rush to prepay property taxes

BY ROBERT BERCZUK

A change in how much state and local taxes can be deducted from a federal 1040 tax form in 2018 spurred a rush of folks to Town Hall during the last two weeks of December to prepay their property taxes.

Finance Director Tina Collins said the town received about $1.8 million in prepaid property tax collections during that time frame compared to about $330,000 a year ago.

Under the congressional tax-reform bill passed last month, taxpayers not claiming the standard deduction can deduct both their state and local property taxes. They also can either deduct their combined income taxes or sales taxes, whichever is higher. The new $10,000 maximum for all state and local deductions effectively raises taxes on wealthy people in high-income areas and reduces a key federal subsidy that makes it easier for states to charge high taxes on rich residents.

Responding to widespread confusion created by the new tax law, the Internal Revenue Service issued a statement saying prepaid property taxes may be deductible in 2017 if assessed and paid in 2017.

That move caused a flurry of activity in wealthier communities, like Jamestown, of people looking to prepay their taxes — instead of opting for quarterly payments — so they can get a larger deduction on their 2017 tax return.

Some even prepaid next year’s taxes — even though the bills won’t be sent out for months — to maximize their deduction, something that’s never happened before, Collins said.

The large influx of early birds did not shock Collins as she saw similar actions in other communities.

“I’m not surprised it happened, especially here,” she said. “We were getting inundated off the hook with phone calls.”

The extra $1.47 million collected compared to last year doesn’t provide a financial benefit to the town since interest rates are so low, Collins said. The money also came at a time when the town was expecting an influx of cash as quarterly taxes were due in mid-December, she added.

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