City and county officials are dealing with what they say is an unprecedented surge of property owners paying taxes early, as homeowners — particularly in predominantly Democratic states with high local tax rates — try to avoid the effects of the tax-code overhaul signed last week by President Trump.
That bill, which takes effect in 2018, limits the amount of state and local tax payments people can deduct from their federal taxes to $10,000. The provision was one of the most contentious in the tax bill shaped by Congressional Republicans, with critics saying it would unfairly penalize residents of blue states and cities with a heavy local tax burden.
Those fears have been dramatically illustrated this week in the D.C. region, as hundreds of homeowners have lined up at tax offices to pre-pay their property taxes for 2018 before the limit on deductions kicks in.
There is no guarantee this ploy will work: The tax bill is silent on whether 2018 property-taxes paid in 2017 will avoid the deduction cap that applies to income-tax filings for 2018 and beyond. (Income tax prepayments of this kind are specifically barred under the bill.)
A spokesman for D.C. Chief Financial Officer Jeffrey S. DeWitt said the District’s tax attorneys presume the Internal Revenue Service will decide in the coming months whether property-tax prepayments can be deducted in 2017 filings.
Roughly 60 people stood in line midday at Montgomery County’s Department of Finance in Rockville to prepay their 2018 property taxes. (Rachel Siegel/TWP)
But that hasn’t stopped people — those with the ability to come up with a few thousand dollars on short notice — from trying.
[A roundup of tax prepayment options in D.C., Maryland and Virginia]
More than 1,700 taxpayers lined up outside the Fairfax County government center Tuesday to pre-pay their property taxes, while 750 people sent wire transfers and about 650 dropped off payments in a government lockbox that normally gets two or three pieces of correspondence a day, said director of revenue collection Scott Sizemore.
“There is simply no comparison” to previous years, said Sizemore. “It’s unprecedented.”
In Prince George’s County, Md., which does not currently allow prepayment, the County Council was scheduled to convene to vote on an emergency bill that would offer residents the option.
Arlington County, Va., treasurer Carla de la Pava said about 30 people were waiting when her office opened at 8 a.m. Wednesday. As of 10:45 a.m., the county had accepted more than $5 million in early payments from 644 taxpayers.
“This is completely unusual. They’ve been coming in for weeks,” said de la Pava, adding that some taxpayers were paying up to three years of taxes in advance. Since property tax bills for future years are not out yet, officials say people interested in prepaying should base their payments on the amount of taxes they owe this year.
Local officials said that while Virginia has allowed early payments for years they could give no advice on whether prepayment would save taxpayers money under the new tax code. Homeowners were advised to seek professional tax advice before making a decision.
“We’re making sure we tell people we can’t guarantee it’s deductible” on their 2017 federal tax forms, said Roger Zurn, treasurer in Loudoun County, where a steady stream of 10 people at a time have been waiting at the Sterling and Leesburg government offices.
Virginia, along with D.C. and Maryland, is among the places hardest hit by the loss of the deduction for state and local taxes. More than 37 percent of tax returns filed in Virginia in 2015 included the deduction, according to data from the Tax Policy Center. In the District 40 percent of returns deducted state and local taxes, and in Maryland 46 percent. De la Pava, who is an officer in the Virginia treasurers’ association, said concern among state residents about the new federal tax rules appears to be highest in affluent Northern Virginia.
In the District, Mayor Muriel E. Bowser (D) openly encouraged homeowners last week to prepay their 2018 property taxes, either online at the D.C. Office of Tax and Revenue or at any Wells Fargo branch in the District. (Those who seek to pay at the bank locations must bring a 2017 property-tax invoice with them.)
“Because of how hastily this tax reform legislation was created and passed, even its authors cannot fully explain all of the many ways it will hurt millions of hardworking Americans,” Bowser said in a written statement. “One thing we do know, however, is that by limiting income and property tax deductions to $10,000, it will indeed raise taxes.”
D.C. Council member and finance committee chairman Jack Evans (D-Ward 2) said he and other council members have heard from many interested in paying property taxes early. “We’re having a lot of inquiries about it, a lot of emails, a lot of calls,” said.
Montgomery County, Md., the second-most populous jurisdiction in the region after Fairfax, had no law allowing homeowners to prepay — until Tuesday. That’s when the County Council broke its winter recess to pass a bill making property-tax prepayments legal.
“Everyone is scrambling at the last minute here to do the right thing,” said council member George L. Leventhal (D-At Large).
