Updates on Prepayment of Property Taxes - Township Assessor Ali ElSaffar

 

I was at the Cook County Treasurer’s office on Thursday, December 28, and learned of a few things regarding the prepayment of property taxes that I wanted to share.

First, there has been a huge increase in prepayments compared to last year.  Last year, the Treasurer received $14.3 million in prepayments from 1,700 people.  As of Thursday this year, the office had received $407 million from 63,000 people.   That’s a thirty-seven fold increase, and taxpayers still have a few more days in which to make prepayments!

Second, the Treasurer’s downtown office will be open on Sunday, December 31 from 9 AM to 5 PM to accept in-person payments.  The Treasurer’s office will not be open on Saturday, December 30, but all branch offices of Chase Bank will be open on Saturday, and they will be accepting in-person payments.  In addition, taxpayers can prepay their taxes at www.cookcountytreasurer.com through the end of the day on December 31.  Most people have prepaid their taxes through the web site rather than in person.

All of this interest in prepaying property taxes is due to changes in the federal tax law set to take effect in 2018, at which time the deductibility of state and local property taxes against one’s federal income taxes will be limited to $10,000 per year.  In light of all the interest in prepayments, the Internal Revenue Service on Wednesday issued an advisory regarding the deductibility of prepaid property taxes.  There were stories about this advisory in both Chicago newspapers, as well as in national newspapers such as the New York Times and the Washington Post.

I read the IRS advisory after hearing about it downtown on Thursday.  Even though I have a lot of experience with tax law, I found this advisory difficult to understand.  Perhaps the clearest part of the advisory is its title, which states that “Prepaid Property Taxes May be Deductible if Assessed and Paid in 2017.”  This makes it clear that some property tax prepayments are deductible and some are not, and that the issue of deductibility varies from county to county across the United States.

In Cook County, where taxes are paid in arrears, it is my opinion that prepaid taxes should be deductible for most taxpayers.  Cook County taxpayers paid their 2016 taxes in two installments in calendar year 2017.  Now, some taxpayers are seeking to pay the first installment of their 2017 taxes before the end of 2017.  Since the assessed values on which these bills are based were set in 2017, I believe taxpayers can say that their prepayments were “assessed and paid in 2017,” and thus should be deductible on their federal income tax returns. 

The Cook County Treasurer seems to agree with my opinion.  Thursday’s Chicago Sun-Times, after explaining all the plans to allow people to prepay through December 31, said the following:

“But an IRS advisory issued Wednesday appeared to throw a monkey wrench into the works. The directive, which some found confusing, drew a distinction between paying an estimated amount and paying exact amounts on assessments made prior to 2018.

Pappas has seen the new IRS advisory and said Cook County residents who pre-pay will not be affected. Still, she urged residents to check with their accountants if they had any questions.

“There’s no guessing what the amount is. This is an exact bill,” she said.

The problem with all this is that the federal tax law has changed significantly in a short period of time and no one, not even the IRS, is exactly sure what the ramifications of the change will be around the country.  In my opinion, most people pre-paying in Cook County should be able to deduct their prepayments on their 2017 federal income taxes.  But I am not the ultimate decision maker in this regard, and agree with the suggestion made by the Cook County Treasurer that taxpayers with questions should talk to their tax advisers about what steps are best for them.

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