Paying NYC Taxes Now Is 'No Brainer' After GOP Bill, Expert Says

NEW YORK, NY — New York City residents can pay next year's property taxes early to get around the new limits on federal tax deductions for state and local taxes, city officials said.

The city's 1.1 million property owners can pay property taxes right now that are normally due in January or April, said Aziza Taylor, a spokeswoman for the city Department of Finance, which collects city taxes. Residents can pay online, by mail or in person until Friday Dec. 29.

Taxpayers across New York State, where property taxes are among the highest in the nation, are trying to get their payments in before the end of the year to deduct them on their income tax returns in the spring.

The move will likely help New Yorkers get around a provision in the new Tax Cuts and Jobs Act, the federal tax overhaul President Donald Trump signed on Friday, that limits deductions for state and local property, income and sales taxes to $10,000 starting in 2018. Taxpayers who itemize their deductions can currently deduct the full amount of those taxes.

"Prepaying items that are currently deductible, but will not be in the succeeding year, is the proverbial 'no brainer,'" Robert Willens, a Manhattan-based accountant and tax expert, said in an email.

To help New Yorkers do just that, Gov. Andrew Cuomo issued an executive order on Friday suspending portions of state law that restricted local municipalities from issuing property tax bills and collecting taxes early.

Tax offices in the suburbs have reported swarms of residents trying to pay their taxes early. The Department of Finance, though, is "still in the process of tracking which payments came in because of the regular due date" — Jan. 2 for properties worth $250,000 or more and Jan. 16 for those worth less than $250,000 — "and which payments came because of increased activity," Taylor said.

The Jan. 2 payment for more expensive properties will cover taxes for the first six months of 2018. Owners of less expensive properties pay for the first three months of the year by the Jan. 16 deadline and for the second three months by April 16, Taylor said.

The Internal Revenue Service reportedly has yet to officially decide whether prepaid 2018 taxes can be deducted on 2017 income tax returns. But Willens said Congress is "is not uncomfortable with this strategy" — the new tax bill explicitly banned prepaying and then deducting state and local income taxes, but left property taxes alone.

"They don't feel nearly as hostile towards real estate taxes as they do towards income tax," Willens said in a phone interview.

The Department of Finance cautions taxpayers to "consult their tax advisor for guidance on the Federal tax treatment of their property tax payments," Taylor said.

The limit on state and local deductions only affects New Yorkers who itemize their deductions, currently about a third of New York City taxpayers. That number may drop next year, as the new tax law nearly doubles the standard deduction to $24,000 from $12,700. Taxpayers generally take the standard deduction if all their deductible expenses add up to less than that number.

Prepaying property taxes is most advantageous to wealthy New Yorkers who own the most expensive properties, as they'll be hit hardest when the limit takes effect next year, Willens said.

"If you're a reaosnably hig-income person it's almost certain that you're itemizing these deductions, so losing these deductions ... is just a total disaster," Willens said. "It's going to hurt New York City probably as much as any place in the country."

The property tax deduction isn't available to renters, Willens said. Property taxes are considered the landlord's responsibility, and the landlord pays them directly to the city, though some portion of any rent payment probably accounts for that tax expense, he said.

(Lead image: A "for sale" sign is seen in front of a row of houses in Brooklyn in 2012. Photo by Spencer Platt/Getty Images)