Q: Why all the hullabaloo around property taxes this week?

cuomo_prop_tax_cap.jpg

Q: Why all the hullabaloo around property taxes this week?

A: The final Republican tax bill (aka, the Donor Relief Act of 2017), caps the previously unlimited deduction for state and local income taxes at a max of $10k starting in 2018. We wrote about this deduction previously, when the Senate considered eliminating it entirely. This cap hits homeowners in high tax states (like NY, NJ, and CA) the hardest, as many owe quite a bit more than $10k between state income tax, local income tax, and property tax.

So, people wondered, can I pay some of my 2018 taxes now, while the deduction is still unlimited? The final tax bill specifically said that any prepayment of income taxes in 2017 would not be deductible, but left the loophole open for property taxes. That means that people who owe property tax due in 2018, but choose to make their payment in 2017, could deduct that payment on their 2017 federal taxes, while the deduction is still unlimited.

Trump signed the tax bill on Fri, Dec 22 and Gov. Cuomo issued an order to ease local laws that would have prevented property tax prepayment. Well…this was already allowed in NYC, but people on Long Island and elsewhere lined up to write early checks. Bottom line on Cuomo’s action: makes no difference for people with  income too-low-to-itemize, makes no difference to anyone in NYC, helps save anywhere from a few hundred to a few grand for selected wealthy NY’ers on a one-time basis.

Other kinds of state-level changes to cushion the impact of the SALT cap are under discussion by legislators.

- initially published in the 1/1/2018 newsletter

Stephanie Lee