New rules set off rush to prepay taxes
City and town officials across Massachusetts are being deluged with calls and questions — and even requests for financial advice — from homeowners who want to know whether they should pay next year’s property taxes now, before new rules that cap state and local tax deductions at $10,000 take effect in 2018.
To the bewilderment of municipal workers, taxpayers are dropping off checks — in at least one case for as much as $30,000 — to beat changes contained in the sweeping federal tax bill passed this week by Congress.
To prepay or not to prepay is chiefly an issue for homeowners who deduct their property taxes, especially those who won’t itemize under the new plan, which boosts the standard deduction to $24,000 for a married couple, or whose property taxes and state income taxes, combined, will exceed the $10,000 cap for those deductions that will take effect in 2018. For them, paying next year’s property taxes now could save hundreds, or thousands of dollars.
“Probably half the population is paying more than 10 grand in property tax . . . the valuations on the houses is crazy,” said Milton town treasurer James McAuliffe. “I already paid. I wrote the check today.”
The confusion around prepaying is just one of many raised by the bill, which moved through Congress in about a month. Accountants and financial advisers are being asked about deductions for state income taxes, charitable contributions, and moving and commuting expenses that will be reduced or eliminated next year. The bill will also reduce the corporate tax rate from 35 percent to 21 percent, give temporary cuts for individuals, and provide a break for companies organized as pass-through entities.
In Wellesley, where the average tax bill on a single family home is about $15,000, the collector’s office has been fielding 40 to 50 calls a day on property taxes, and has accepted as many as 40 prepayments a day over the past two weeks, said treasurer Marc Waldman.
“We were expecting a rush, but not like this,” said Waldman, who reported the $30,000 payment. “Their accountants are telling them to pay the entire  calendar year. There’s so much misinformation flying around.”
Even in Boston, where taxes are lower compared with many suburban communities, officials say they have processed about 300 prepayments over the past two days.
Milton residents have the option of paying online until Dec. 31, but in most communities, payments would have to be made before Dec. 29. And with Christmas days away, that leaves little time for taxpayers to decide what makes financial sense.
Bill Driscoll, of Driscoll Financial in Plymouth, said anyone whose state and local tax bill exceeds $10,000 should strongly consider paying in advance.
“People who have substantial property tax, as well as income tax — because it’s a combined deduction — probably should prepay because it wouldn’t take long to hit the $10,000 limit for next year,” Driscoll said. “People of modest income who are probably not going to hit the $10,000 anyway, for them it’s probably neither here nor there.”
But he said making definitive recommendations about tax strategies based on the sweeping tax overhaul bill soon to be signed by President Trump is vexing him and other financial advisers.
“This profession doesn’t usually operate on the basis of ‘everything is changing tomorrow,’ it’s based on analyzing things,” Driscoll said. “I don’t even think people know what questions to ask.”
Property tax bills in Massachusetts are calculated on a fiscal year that runs from July through June. Most municipalities allow homeowners to prepay the final half of their property taxes in December. But Waldman said Wellesley is probably the only one that is allowing people to prepay what they are likely to owe through December 2018. A few residents, he said, wanted to hand over even more money.
“That made some people really angry, that we wouldn’t take more [payments],” he said.
In Weston — where the average property tax bill of $20,000 is the state’s highest — town officials are getting up to 40 calls a day from residents wanting more information on prepaying, said town treasurer Pete Forcellese.
Sheila Tracy, Winchester’s treasurer, said prepaying is more complicated for homeowners whose property taxes are collected by a mortgage lender. If they pay upfront, they should also inform their lender so they get the money back. Otherwise, they will end up double-paying their property taxes, which will require the town to issue a refund.
Most of Massachusetts’ 1.5 million taxpayers, however, don’t need to worry about coming up with next year’s money now, said Geoff Beckwith, executive director of the Massachusetts Municipal Association. That’s because their state and local tax obligations will fall far below the $10,000 cap and their income won’t be high enough to warrant itemizing.
Still, Tracy said her office will probably have to work longer hours to accommodate the rush of calls and payments — about 100 more people than usual per day. She said her office has processed about 60 prepayments so far, and with an average tax bill of $12,590 on a single-family, many more likely are on the way.
“I wouldn’t go so far as to call it a panic,” Tracy said. “I would say that there are a lot of people coming in concerned.”
Correction: An earlier version of this story misstated who might benefit from prepaying taxes.