On Friday, President Donald Trump signed the “Tax Cuts and Jobs Act” into law, effecting the most drastic changes to the American tax code in three decades that hands permanent tax breaks to corporations and the wealthy, like himself.
Hours later, New York Gov. Andrew Cuomo (D) signed an executive order directing the Department of Taxation and Finance to work with local governments to facilitate early collection of 2018 property tax payments.
Cuomo’s intent is to allow New Yorkers to deduct their local property taxes from their federal tax bills under current tax rules.
New regulations restricting property tax deductions take effect Monday, January 1.
The federal tax law Trump signed Friday caps local and state tax deductions at $10,000, possibly causing residents’ property taxes to increase, in some cases significantly.
Cuomo said in a statement:
“As Washington wages an all-out assault on this state and this nation, I have authorized local governments to allow property owners to pay part or all of their taxes early. New York has made unprecedented progress reducing the burden of taxes on our middle-class families, and we will not allow this attack to roll back all that we have achieved.”
Cuomo’s order suspends local laws limiting taxpayers’ ability to pay a portion of their taxes until the end of the year.
Each local tax collector is now authorized and directed to accept partial payments until the close of business on Friday, December 29.
Taxpayers can make their payments online until 11:59 p.m., Sunday, December 31.
Payments by mail postmarked on or before December 31, are also authorized.
Wednesday, the Internal Revenue Service (IRS) announced taxpayers can prepay 2018 property taxes only if their local government have already delivered tax assessments, and they make payment by the end of the year.
This clarifies who is eligible to defray their taxes early, but threatens to create confusion across the country as taxpayers have been rushing all week to prepay.
Critics say this confusion is indicative of the celerity with which Republicans rammed through their bill in order to get it onto the president’s desk before the new year.
Louisiana State University tax expert Philip Hackney is one such critic.
“This is not the way to do legislation that will massively impact the entire economy. It sets off a flurry of action from people trying to save money, and they act as rash as the legislators who pushed this thing through.”
Counties across the country have different rules for property tax assessments. Nobody has data on exactly how many municipalities have already completed them for 2018.
This makes it difficult for the IRS to enforce its ruling.
Andy Grewal, a tax expert at the University of Iowa, said:
“They only have a couple days, but if they want to protect their taxpayers they could change the assessment date of taxes. But retroactively changing the assessment date, that would raise some thorny legal questions.”
Localities are supposed to consult local law prior to issuing property taxes, which they may not be able to do now in the dash to meet the new deadline.
This could give the IRS grounds for rejecting some claims.
Bradley Heim said:
“It would have to be a mass denial to everyone in the county who took that deduction, but that seems awfully administratively difficult to accomplish. It’s really difficult to guess what will happen if folks don’t follow this ruling.”
Another problem this presents is for localities that may not have their 2017 assessments finished until 2018 or later. This could leave taxpayers unable to deduct taxes issued for months in 2017, even if they tried paying them ahead of time.
About this, Andy Grewal said:
“The legal issue would be: ‘Is that a payment of a tax or is it just a deposit? I’m not sure it’s a winning argument, but somebody could argue that they’re really paying taxes and should be able to deduct them.”
Trump and the Republicans have created quite a mess, haven’t they?
Just wait til next year.
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