IRS statement dampens Austin-area rush to prepay property taxes

6:21 p.m Wednesday, Dec. 27, 2017 Local
Travis County Tax Assessor-Collector Bruce Elfant said Wednesday that “it looks like Texans are out of luck in terms of being able to deduct 2018 property taxes.”

A new federal tax law, coupled with the flu, hasn’t made for a merry holiday week for Bruce Elfant, Travis County’s tax assessor-collector.

Elfant said hundreds of calls from property owners wanting to know if they can prepay their 2018 property taxes, hoping to take advantage of a key deduction before it goes away, forced him into work Wednesday — the first day out of the past six that he didn’t run a fever from the flu.

Until late Wednesday afternoon, Elfant didn’t know the answer to the pressing question many people were calling about: whether the Internal Revenue Service will accept advance property tax payments for 2018 as a tax deduction for 2017.

For taxpayers who itemize, the tax overhaul signed last week by President Donald Trump caps deductions for state and local income, sales and property taxes at a combined $10,000 when calculating federal tax liability.

Across the country, many taxpayers — including Central Texans — were scrambling this week to prepay their 2018 property taxes before the new cap kicks in Jan. 1, hoping to save on their federal taxes.

That cap could make a big difference for taxpayers in Texas, which has no state income tax and has higher property taxes than the national average.

“We’ve taken about 500 property tax calls today,” Tiffany Seward, director of communications for the Travis County Tax Office, said about midday Wednesday, although not all calls were about the deduction issue.

Then, late Wednesday afternoon, the IRS issued a statement that indicates many taxpayers will not be able to take advantage of the deduction. The IRS said taxpayers can deduct their 2018 property tax payments only if they have already received their tax bill — known as a tax assessment — from their local tax authority.

Elfant said the IRS statement seems decisive for Texas property owners.

Noting that tax bills in Texas counties aren’t calculated until October, “we can’t assess taxes that don’t exist yet,” Elfant said.

“It looks like Texans are out of luck in terms of being able to deduct 2018 property taxes, if the assessment has to be done in 2017. Our tax schedule doesn’t work that way,” Elfant said.

Prior to the IRS statement, Elfant’s office had been accepting advance property tax payments from Travis County property owners, saying it would hold them in escrow until 2018’s tax bills are calculated.

His office said it would continue to accept prepayments and hold them in escrow, if taxpayers want to continue to prepay their taxes. Taxpayers can later ask for a refund, if they choose, Seward said.

“I think it’s unfortunate,” Elfant said. “For all these years, Texans have been able to deduct all their property taxes from their income tax. Next year, they’ll no longer be able to deduct their property tax amounts over $10,000 and we don’t see a way that prepaying enables Texas property tax payers to get around that.”

In Williamson County, Tax Assessor-Collector Larry Gaddes said his entire staff was busy assisting customers Wednesday. “We typically have no one prepaying their taxes,” he said. “Today we have had several dozen customers in our office prepaying their 2018 taxes and have received dozens more in the mail.”

Following the new information from the IRS, Gaddes’ office issued a statement Wednesday afternoon that no more property tax prepayments would be accepted.

“Effective immediately: WE WILL NOT ACCEPT PRE-PAYMENTS OF 2018 PROPERTY TAXES. The IRS has determined that they are not deductible because the taxes have not yet been assessed for 2018,” the statement read.