Local property tax collectors: Can’t prepay 2018

The GOP proposal would limit the amount of state and local taxes people can deduct on their federal income tax returns to $10,000. That includes a combination of both income as well as property taxes, and is said to be a major drawback for high-tax states like California. If approved, the new federal changes go into effect Jan. 1.

With time of the essence as the clock nears 2018, property owners are now asking whether they can fork over more cash this year and prepay next year’s taxes in an effort to capitalize on current deductions. No, San Mateo County cannot accept prepayment of 2018 property taxes because property assessments haven’t been conducted yet, explained Assistant Tax Collector Robin Elliot.

A similar assessment goes for many other counties in California, said Margaret Olaiya, acting assistant director for Santa Clara County’s Department of Tax and Collections.

However, people can pay the second installment for this current year’s property taxes and possibly count them toward 2017. For those who opted to pay their property taxes in installments, the second of which is typically not due until April, Elliot said they can make the full payment now.

But exactly when that check needs to be received in order to count as a deduction in 2017 is unclear and they suggested people contact their accountants for advice.

“I would like to encourage people to consult their tax professional to best prepare them for any future impacts to their taxes,” Elliot said, suggesting it’s not up to the tax collector’s office to determine deduction eligibility.

Olaiya agreed saying “I think everybody is still trying to unravel and un-package this in such a way that works for taxpayers as well as those who are filing. My recommendation is they talk to their financial advisors.”

In San Mateo County, Elliot suggested the payments must be received in calendar year 2017. And whether you mail a check, pay online or drop it off in person, it will only be processed once it’s received not just postmarked. With New Year’s Eve falling on a weekend, it means Friday Dec. 29 may be the cutoff.

But Olaiya suggested an accountant may be able to determine whether payments made in 2018 toward 2017 taxes can still count. Like many across the country, all eyes are on Washington, D.C., as experts analyze the pragmatics of how the new tax rules roll out.

While both counties reported an increase in the number of people paying the second installment early, Elliot and Olaiya indicated they cannot accept advance payments for 2018 since property assessments haven’t been conducted.

The California Association of County Treasurers and Tax Collectors has been reviewing the state’s revenue and taxation code to determine how the GOP’s tax cuts might affect operations. Ultimately, Olaiya said they’ve determined tax collectors don’t have the authority to accept prepayments for bills that haven’t been issued yet.

Taxes are based on a property’s assessed value as of Jan. 1 of a given year. It typically takes the San Mateo County’s Assessor-County Clerk-Recorder’s Office several months to compile the tax roll, meaning next year’s bills don’t exist yet, Elliot explained.

“We cannot accept payment earlier, there’s nothing to pay,” Elliot said. “Assessments can take quite a while, that’s why taxes aren’t billed until later in the year.”

But some concerned California taxpayers have suggested the county try to quickly amend its rules and set up a system where people can estimate their property taxes — which may be more easily predicted due to Proposition 13 — and have the county hold the funds or set up some type of escrow account. But with less than two weeks in the year and the legalities of such a move unknown, it appears unlikely.

When asked about the prospect, Elliot noted it’s hard to even speculate how such a system might function and emphasized they can only work with what’s currently in place. 

“We certainly don’t have the ability to monitor payments in advance in that way. Our system won’t even accept payments in advance,” Elliot said.

Olaiya agreed stating “until we receive the roll and who is going to be billed for what, we don’t have a bill to create.”

Regardless, Elliot and Olaiya strongly urged people to consult a tax preparation professional for advice.

While the two counties’ tax collection agencies have been inundated with calls in recent days, they noted it’s been a long journey to get to this point. 

“The association for treasurers and tax collectors have been discussing this since the Republican tax plan was made public, because we’re all going through the same problems,” Olaiya said.

samantha@smdailyjournal.com

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Twitter: @samantha_weigel