The federal tax overhaul signed by President Donald Trump last week has property owners around the country scrambling to their local tax offices. But not in Michigan
ANN ARBOR – The federal tax overhaul signed by President Donald Trump last week has property owners around the country scrambling to their local tax offices.
Prepaying 2018 real estate taxes before the end of the year could allow taxpayers to preserve deductions that are being capped under the new law, according to an IRS advisory issued Wednesday.
But that’s not possible in Michigan.
Property tax assessments under Michigan law can’t be calculated before Dec. 31.
“Michigan’s 2018 property taxes will not be assessed until 2018,” said Danelle Gittus, a spokesperson for the Michigan Treasury.
“According to the IRS, the prepayment of 2018 state and local real property taxes will be deductible on a taxpayer’s 2017 tax return only if those taxes were assessed before 2018. Therefore, Michigan’s 2018 property taxes are not deductible on the taxpayer’s 2017 tax return.”
Soon after passage of the tax reform bill, accountants began encouraging their clients to pay off their 2018 taxes right away.
Many property owners in other states have sought to take advantage of the deductions one final time before the $10,000 cap on deductions for state and local taxes goes into effect in 2018.
Some made estimated payments for 2018, but that won’t do.
The IRS says tax filers can only avoid the cap by paying property taxes that have actually been assessed in 2017.
Some local governments assess property taxes in time periods that extend into 2018, but not in Michigan.
Jim MacPherson of Ann Arbor hoped to follow the advice of the IRS, but was left envious of other states where prepayment of property taxes is allowed.
“New York, New Jersey and California actively try and help their citizens. This is tens of millions of people who are just trying to pay their taxes early so they can get their deduction early before the cap next year,” said MacPherson, CEO of MacPherson Strategies LLC on North Main Street.
“It’s a question of what’s fair here. I’m all for paying more in state and federal taxes if that’s going to help the working poor,” he said. “I guess Michigan state officials don’t feel it’s important to help their citizens.”
After receiving a number of inquiries from residents this week, Ann Arbor officials issued a statement Wednesday explaining that it would be illegal to allow property owners pay 2018 taxes before the assessment process is complete.
“Prior to levying real property taxes, assessment values must be calculated as of December 31,2017 (Tax Day),” the city announced, pointing to The Michigan General Property Tax Act.
“Assessment notices based on these values are mailed to property owners in February 2018. Owners then have an opportunity to protest the assessment at the March 2018 Board of Review. Property Owners may also appeal those decisions to the Michigan Tax Tribunal. Finally, there’s an Equalization process that occurs in April of 2018 that could affect the values upon which your 2018 taxes are based.”
Washtenaw County Treasurer Catherine McClary said Michigan residents can still earn deductions on 2017 property taxes if paid by Friday, Dec. 29 – the last business day of the year.
In states where prepayments for 2018 are allowed, millions in early tax payments were collected as thousands lined up to heed the advice of the IRS.
The Washington Post reports that more than 1,700 property owners lined up to prepay property taxes in Fairfax County, Virginia on Tuesday, Dec. 26 while 750 people sent wire transfers and about 650 dropped off payments.
That county collected nearly $16 million in tax prepayments on Tuesday alone.
