HARRISBURG, Pa. - City officials Wednesday said they would accept prepayment of 2018 property taxes from property owners looking to maximize their deduction for their 2017 federal income taxes, although a ruling by the Internal Revenue Service later Wednesday could impact whether those payments are tax deductible.
The move comes as taxpayers have been asking their local taxing authorities about the possibility of prepayment, and several local counties have come out and said they will not accept it.
"We looked at our process as a city and we determined that we were able to take prepayments," said Dan Miller, Harrisburg's city treasurer.
To qualify for prepayment in Harrisburg, you must pay off all other tax and utility balances and attach your 2017 property tax invoice. The prepayment must be made in the amount of what you paid for 2017, minus a 2 percent early payment discount.
If you're mailing prepayment, it must be postmarked by December 31st, and any checks must say "2018 prepayment" on the front.
Under the Tax Cuts and Jobs Act signed by President Trump, in 2018, there's an increase to the standard deduction to $12,000 for single filers and $24,000 for married joint filers, making it less likely that taxpayers would have enough deductions to itemize instead. Also, a new $10,000 cap on the previously unlimited state and local tax itemized deduction takes effect.
Those changes mean in theory, paying additional property tax could mean a larger deduction in 2017, whereas a taxpayer could get no deduction in 2018.
"If you're still making your tax payment for 2018 when the standard deduction goes up, you're essentially not going to get any benefit for making that payment," Miller said. "So if you move that into 2017, when you're still itemizing and you make that payment, well then you'll increase your itemized deductions and you'll get a break."
However, the IRS issued guidance Wednesday saying it would only permit prepaid property taxes to be deducted from 2017 income taxes as long as they were assessed and paid in 2017.
As of Wednesday, it was unclear how that announcement would impact Harrisburg's collection of prepaid property taxes.
In Pennsylvania, property taxes are paid to three different taxing authorities: the local municipality (city, borough or township), the county, and the school district. In most cases, the county handles combined billing for the county and the local municipality in the first quarter of the year, while school property tax bills are sent out during the summer.
While Philadelphia, Pittsburgh and several neighboring counties in the Pittsburgh area are also accepting prepaid property taxes, which is standard practice for them, Harrisburg is the only community in the FOX43 viewing area that has announced it is doing the same thing. Several central Pennsylvania counties said Wednesday they are not accepting prepayment of any kind.
Tax collectors around the area have been flooded with questions about whether prepayment will be allowed, and county treasurers across the area have said they will not accept it.
"No one has ever wanted to prepay their taxes," said Janis Creason, Dauphin County treasurer. "Most people have been trying to find out how to delay paying their taxes, not pay more so it's an unusual question and one that we weren't anticipating."
Officials in Dauphin, Lancaster, York and Lebanon counties told FOX43 Wednesday they are not accepting prepayment because they are bound by state law to not collect any taxes in advance.
Even if that law was not in place, most counties do not have the ability to collect in advance because millage rates are not certified until after January 1st, and tax bills do not go out to property owners until February or March, according to several county treasurers contacted Wednesday by FOX43.
"We are not allowed to collect a bill that has not yet been issued," Creason said. "We don't have the technology, for good reason, because legally we can't do it, so we haven't developed any system that would allow us to carry a credit balance."