Source: MSN Money
Municipalities around the country this week have seen a surge in homeowners prepaying their property taxes as they brace for a major change in deductions from the Republican tax law that will go into effect on January 1.
Last week, President Donald Trump signed the bill into law after months of legislative wrangling on Capitol Hill, marking one of the most drastic overhauls of the federal tax code in decades. The law eliminates the Affordable Care Act’s so-called individual mandate, opens parts of Alaska up to oil drilling, and upends the tax code for individuals and businesses, among other changes.
But many high-end homeowners could be paying more in property taxes next year because of a new rule that caps the amount of state and local tax deductions at $10,000. Since there is currently no limit on this deduction, people are rushing to prepay their property taxes now, before the cap kicks in at the turn of the new year.
From Virginia to Massachusetts, and New York to California, municipalities — mostly in areas with higher levels of state and local income taxes — have seen a stunning increase in property tax receipts in recent days.
“It’s been insane here,” James McAuliffe, the town treasurer in Milton, Massachusetts, told The Wall Street Journal. “Thank you, Mr. Trump, for solving my cash-flow issues. It’s become a very expensive town.”
McAuliffe estimated that roughly half of Milton’s residents would be affected by the new $10,000 cap. The limit also covers state and local income and sales taxes, but the bill prohibits people from prepaying those taxes. Lawmakers left the prepayment of property taxes up to local municipalities.
High-income taxpayers who itemize their deductions currently benefit the most from the unlimited state and local tax deduction, commonly referred to as SALT. Individuals with incomes greater than $100,000 make up roughly 90% of the deduction’s beneficiaries, according to an analysis by the Tax Foundation.
This means that homeowners in high-income and high-tax states like New Jersey, New York, California, Illinois, Texas, and Pennsylvania will bear the brunt of the change.
The Republican tax bill marks the culmination of Trump’s first major legislative achievement as president nearly one year into his first term. The bill will go into effect on January 1, 2018.