CAPITAL REGION — Some Capital Region residents are looking to pay their 2018 property taxes before year’s end because of changes coming with the federal tax law moving toward near-certain approval in both houses of Congress.
The proposed law would limit property and state income tax deductions homeowners are allowed to take on their federal income tax returns to $10,000, starting next year. That’s prompting some financial advisers to suggest it makes sense for people to pay their 2018 taxes before Dec. 31, while they are still fully deductible.
Requests to pay early are forcing an unanticipated decision on town and city governments, which don’t normally accept tax payments before Jan. 1 — but aren’t prohibited from doing so, either.
“I’ve had a lot of inquiries myself, and my [tax receiver] also has had inquiries,” Glenville Town Supervisor Chris Koetzle said. “For a couple of days there, it was one of the more popular emails I was getting.”
Glenville has decided that because the warrant to collect county and town taxes is dated Jan. 1, it won’t accept payments before then. “Our warrant says Jan. 1, and you cannot pay before that date,” Koetzle said.
Clifton Park, however, plans to accept payments before the end of the year, assuming Saratoga County has provided the individual bills by then.
“Unless I find different information, I plan to move forward with accepting county tax bill 2018 payments early,” Town Supervisor Phil Barrett said. “The last obstacle from a practical standpoint is when we will receive the actual bills from the county. I remain skeptical the feds will recognize the payments for 2017 tax purposes, but that decision is above my pay grade.”
The proposed federal bill still allowed for all payment of property taxes, but had prohibited early payment of state income taxes. The law allows deductions for property and state income taxes, but combined they can’t exceed $10,000. The House passed the tax bill Tuesday afternoon, but later in the day it was determined that another vote will need to be taken Wednesday because of three conflicts with Senate budget rules. The Senate was still expected to act Tuesday evening or Wednesday.
Limiting the federal deduction for property and state income taxes to $10,000 per year is one of the major changes the new law would make — and is a primary reason why local Republicans in Congress, U.S. Reps. John Faso and Elise Stefanik, voted against the measure.
The earlier House bill allowed for no property or state income tax deductions, but the Senate allowed a deduction of up to $10,000, and that’s what the final legislation specifies.
The cap is a bigger deal in New York state than in most states, because of high property taxes — the average state and local tax deduction statewide last year was $24,000, according to a coalition of local government associations. The law would double the standard deduction.
Paying the taxes before Jan. 1 would allow a homeowner to deduct the 2018 payments when they calculate their 2017 taxes in the next few months, along with the 2017 taxes they paid earlier this year. The current deduction rules will remain in effect for 2017 taxes, which most homeowners will calculate between late January and April 15.
Whether a municipality can except payments earlier than Jan. 1 depends on whether the community’s 2018 tax warrant — which contains individual tax bills — has been issued, said Kathleen Hodgson, an associate counsel with the New York State Association of Towns in Albany.
The association has been fielding calls from town tax collectors who are getting questions from residents, she said.
“The warrant has to be delivered to the collector of taxes by Dec. 31. Once they have that in hand, then taxpayers could come in and pay their taxes,” Hodgson said. “The taxes can’t be paid until the warrant is issued.”
The tax bill doesn’t become a legal lien against the property until Jan. 1, she said, but “it’s absolutely their discretion” to accept payments early.
While town/county taxes are generally billed annually, cities have the option to bill semi-annually or quarterly.
In the city of Schenectady, payments are quarterly. The warrant is expected to be posted online as soon as Friday, Bureau of Receipts Supervisor Ed Waterfield said. Once the information is posted there, property owners can begin paying if they want to.
“We will mail them out after Christmas but they can be paid online or in person before the new year,” Waterfield said. “We have always been able to accept payment once the bill is in the system.”
There are questions about early payment every year, he said, and while the number of calls may be up slightly, he said the increase was “nothing major.”
The Saratoga County Office of Real Property Tax Services has been getting some calls, said Director Joanne Bosley, but the decision on whether to accept early payments is up to the towns, not the county. The county prints the bills, she said, but then gives them to the towns for mailing to residents. The mailings are generally timed to arrive in mailboxes around Jan. 1.
Hodgdon said whatever decision a municipality makes shouldn’t be interpreted as an endorsement of that position. “Towns officially shouldn’t really be advising people on what to do with their federal tax return,” she said.