High-Value Homeowners Scrambling to Pre-Pay Property Tax Bills

By Seth Daniel

The new, national tax policy has bled significantly into City Hall this week as many residents – particularly those in high-value properties – scramble to City Hall to pre-pay their property taxes for the next two quarters ahead of what is expected to be a significant change to the federal property tax exemption for those with residential properties valued at more than $1 million.

The Mayor’s Office indicated that the City is accepting tax payments for the third and fourth quarters of Fiscal Year 2018 (which runs from July 1, 2017 to June 30, 2018). The Mayor’s Office said if taxpayers would like to pre-pay before receiving the bill, the City will process those payments before the end of the year.

Actual third-quarter tax bills will be sent on Dec. 29.

A basic rule of thumb for the pre-pay idea was that it was a good practice for anyone who anticipated paying more than $10,000 combined in real estate taxes and state income taxes. Those two write-offs will be dramatically changed with the new tax reform bill in 2018.

At the Boston Taxpayer Referral and Assistance Center (TRAC), workers said that there have been many taxpayers who have come to their window late last week and, especially, this week to pre-pay their third-and fourth-quarter tax bills before the end of 2017.

Some, they said, are even paying estimated amounts of their tax bill for next fiscal year.

“Oh yea, there have been a lot of people coming to pre-pay,” said one employee. “They are doing it for tax purposes. They are paying the third-quarter bill, the fourth-quarter bill and some people are actually trying to pay for next year, too.”

That’s because the federal Tax Reform bill that passed this week in Washington, D.C., has changed the rules for state income tax and local property tax deductions – particularly for higher-valued properties. Under the bill’s final version, one would only be able to deduct up to $10,000 in property taxes and state income taxes going forward, according to the Journal of Accountancy. For those with higher-valued properties, that could be a major loss in savings on their 2017 taxes due to the fact that Boston has not sent out their third-quarter bills.

Boston also has not calculated the amount of tax homeowners owe for the third quarter yet, so anyone wanting to pre-pay has to use some educated guesswork.

Using Boston’s 2017 residential property tax rate, the new tax measure would affect those with properties valued at around $1.5 million or more. That’s because a residential property valued at $1.5 million under the 2017 tax rate would equal a tax bill of around a little over $10,000 (once the 35 percent owner occupant credit is applied).

According to the TRAC, bills will be sent out on the last day in December and would be received in January, which is too  late to pre-pay. Some cities and towns sent out bills early in order to try to cut the problem off ahead of time.

Boston did not.

TRAC employees said the best residents can do is estimate what they think they owe and come to City Hall to pre-pay, which is being done so that the larger deduction presumably can be taken on one’s 2017 federal taxes. That larger deduction would expire in 2018 for the larger deduction, which is what has triggered the pre-pay rush.

The Journal of Accountancy indicated there was a provision in the federal Tax Bill’s Conference Report that prevented pre-payment of state income taxes, but nothing was said of real estate property taxes.

Pre-payments of property taxes is not allowed online, so pre-payment can only be guaranteed if one goes to City Hall and pays in person at the TRAC.

Payments can be made by credit card (but no American Express), check or cash. TRAC workers said one could mail a check for pre-payment, but there was no guarantee it would be processed in time.

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