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Most State Residents Hoping To Prepay Property Taxes To Keep Deduction Could Be Out Of Luck

Connecticut residents hoping to pay their property taxes early in an effort to get one last federal tax deduction have been flooding towns and cities with inquiries, but so far few municipalities have agreed to accept early payments on the July 2018 bills.

The tax overhaul signed last week by President Donald Trump puts a new $10,000 limit on the amount of state and local taxes people can deduct from their income when calculating their federal tax liability. That new cap could translate into a tax hike of hundreds or even thousands of dollars in mostly wealthier, high-tax states like Connecticut.

People in some communities are trying to effectively delay that hike for a year by paying their 2018 taxes in advance, though it isn't clear whether doing so will pay off. The new law bars deductions for income taxes paid early but is silent on prepaid property taxes.

State residents can pay half their bills — due Jan. 1 — early, but most towns will not take full payment early.

In Stamford, residents can make a full prepayment toward their July 2018 taxes even though the city doesn’t have a budget or mill rate yet. The prepayment can be used as a credit on their future tax bills, said Mayor David Martin.

Martin said it isn’t a new policy in Stamford, but following a series of phone calls asking about prepaying taxes, the city posted online that taxes can be paid in advance.

“We’re not trying to cheat the federal government, but if you’re changing the rules to disadvantage states like Connecticut, we have an obligation, I feel we have an obligation, to help our citizens whether they’re wealthy or poor,” Martin said. “So from my chair I’m saying, ‘It’s not a whole lot of skin off my teeth to take this money early.’ ”

The new tax law has stirred many to call their accountants for advice.

“In the past week we have gotten so many more calls from not only clients but people looking for advice,” said Andrew Lattimer, tax partner at BlumShapiro in West Hartford. “It’s been absolutely bonkers.”

His advice is, if you can make a prepayment you should.

“Every taxpayer’s situation is different,” he said. “We’ve been trying to look at everyone’s tax projections for 2017 and making sure if it makes sense.”

In the Hartford area, the only municipality to offer the prepayment option is West Hartford.

Town Manager Matt Hart said West Hartford, similar to Stamford, allows residents to prepay taxes as a credit toward a future tax bill.

Bristol's tax office has received a flurry of phone calls with questions about prepaying, but so far has not seen an uptick in actual advance payments.

“We're telling people they're more than welcome to pay the first installment, which comes due Jan. 1 and has to be paid before Feb. 1 to avoid interest," Tax Collector Teresa Babon said Wednesday.

But Bristol can't accept money toward the July tax bills because the city budget and tax rate hasn’t been set.

“It's not like the electric bill where you can pay extra now and they take it off the next month's bill. There is no tax bill for next July in the system, so we couldn't accept those payments," Babon said.

Babon advised that people who pay through escrow funds in their banks may need to contact the bank if they want the money for the January installment paid this month instead of next month.

In Windsor, Tax Collector Cathleen Elliot has been fielding about 15 calls a day, in addition to people stopping in to ask if they can pay July’s property tax bill early. But the answer is no, Elliot said Wednesday, because there isn’t a mill rate to apply that tax payment to.

Bloomfield Tax Collector Jean Kitchens said that her office began getting inquiries as soon as the bill passed and that they have been ongoing.

“We’ve gotten about 30 today,” she said. “The phone has been ringing off the hook.”

Kitchens said the town is not allowing people to pay early, based on a legal opinion issued by the state’s Tax Collector’s Association, adding that the association does urge each town to make its own decision.

Avon, likewise, said it doesn’t have the authority to collect taxes as the fiscal year 2018-19 budget has not been adopted. And Canton officials said they believe under state law they do not have the authority to collect payments due July 1, 2018 and Jan. 1, 2019 until a mill rate is set and a tax warrant is issued.

Similarly, officials in East Hartford, Middletown, Greenwich, Fairfield and Darien have said they will not accept early payments on the July 2018 bills.

The IRS said Wednesday that taxpayers in some states could prepay 2018 property taxes only if state laws allowed them to be assessed before the year's end.

The state has received a number of inquiries, too, according to Office of Policy and Management Secretary Ben Barnes.

“First, let me point out that OPM is in no position to offer an opinion as to the federal tax treatment of property tax payments made in December 2017 to Connecticut local governments,” Barnes said in a letter to municipal leaders. “Furthermore, OPM does not have a role in the supervision of local tax collection beyond a role in the certification of tax collectors.”

Barnes wrote that “prepayment of the January half of Connecticut property tax bills in December appears to be a lawful way to take advantage of the expiring deduction.”

While New York Gov. Andrew Cuomo issued an executive order allowing his state’s residents to pay their full property tax bills early, Barnes said a similar approach in Connecticut would not be practical because the state “has a uniform July-June fiscal year, all communities have laid a tax for the year that ends June 30, 2018, but none have done so for the following year which begins in more than six months.”

An Associated Press report is included in this story.

Courant staff writers Don Stacom, Steve Goode, Ken Byron, Jesse Leavenworth and Shawn Beals contributed to this story.

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