- The new Republican tax law limits the amount of state and local taxes a filer can deduct from their federal tax bill.
- The law also allowed people to prepay their 2018 property taxes before the end of 2017 to get the full deduction.
- In Washington, DC, roughly 7,500 people prepaid upward of $US50 million in property taxes before the deadline.
A slew of residents in Washington, DC, did not wait until the Republican tax overhaul went into effect to get around one of its new provisions.
David Umansky, a spokesman from the District of Columbia’s Office of the Chief Financial Officer, told Business Insider on Wednesday that it collected over $US50 million in just three months from roughly 7,500 filers in DC before a deadline to prepay property taxes.
The Republican law makes it so that residents can only deduct up to $US10,000 of state and local taxes (SALT), such as property, sales, and income taxes.
But it also left the door open for people in certain areas to prepay their property taxes before it went into effect to get around the cap – according to the IRS, in areas where the property tax liability is assessed by the local government prior to the law going into effect. It sent people scrambling to prepay their 2018 property taxes before the law kicked in on January 1.
Umansky said the CFO’s office does not typically track the size of early payments but did so this year due to the increased interest from the changes. Residents could begin prepaying taxes in October.
The statutory assessment of property taxes under local Washington, DC, law allowed the CFO’s office to take the payments early. State and local sales and income taxes could not be prepaid under the new law.
The change was a serious concern of Republicans and Democrats alike from areas where many people used the SALT deduction, such as New York and California. For areas with higher taxes, the limit is expected to prompt an increase in at least part of their taxes, but cuts in other areas could offset the loss of the deduction.
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