DECATUR — An unprecedented rush to prepay next year's property tax bills has enveloped the Macon County offices as homeowners here and across the country hope to take advantage of a major tax deduction before it is wiped out in the new year.
Macon County Treasurer Edward Yoder said Wednesday that his downtown Decatur office has experienced much greater activity since last week when President Donald Trump signed the Republican-backed tax overhaul. The law puts a new $10,000 limit on the amount of state and local taxes people can deduct from their income when calculating their federal tax liability.
"One (long-time county employee) remarked that they took in more prepays in one day then they did during the last 30 years," said Yoder, who has served as treasurer since 2010.
Just Tuesday alone, the treasurer's office received 125 bill payments by 3 p.m., Yoder said.
Similar scenes played out at tax collection offices around the country in places with high local taxes. In Hempstead, New York, town Tax Receiver Donald Clavin said thousands of people packed his office. Oyster Bay, New York, Tax Receiver James Stefanich described the scene as "almost chaotic," saying homeowners began lining up in the cold an hour before his office opened.
The deduction caps were introduced by Congress to offset some of the bill's deficits. Policy observers predict they could translate into a tax hike of hundreds or even thousands of dollars in mostly wealthier, high-tax communities like Chicago's northern suburbs and other high-wealth, high-tax areas in California, New York, and other states.
By prepaying, people in some communities are trying to effectively delay that hike for a year, though it isn't clear whether doing so will pay off. The new law bars deductions for income taxes paid early but is silent on prepaid property taxes. The IRS hasn't yet said how it would handle prepayments.
The change would affect homeowners who continue to use itemized deductions in 2018, particularly those who pay high property taxes. For instance, county records show that a house in Mount Zion with a three-car garage, assessed by the county at a value of $118,000, owed more than $9,000 in property taxes in 2017. When coupled with state income tax, it's likely that homeowner would exceed the new limit for deductions.
"Someone who makes $50,000 (a year), their income taxes are going to be (near) $2,500, and that goes into that calculation," said Mark Wood, a certified public accountant at May Cocagne & King, P. C. in Decatur.
Wood and accountants across the country are still sifting through the fine print of the law. He said he's been recommending his clients prepay their property taxes if they can afford it.
"A lot of people don't have $7,000 or $8,000 sitting around, (but) if you got it in the bank and you can afford to do it, you're not going to earn 10 percent on your savings account," he said, estimating how much the move would save.
Still, the Macon County treasurer said some with much smaller property tax bills are hedging their bets as well. "In Thursday's mail, I got (property tax) prepayment of $60," Yoder said.
Part of the equation involves the new tax law's increase of the standard deduction to $12,000 for individuals. Republicans say that makes it unnecessary for 95 percent of taxpayers to use itemized deductions. Rep. Rodney Davis, R-Taylorville, said in a statement that 75 percent of people in his district, which includes Decatur, already take the standard deduction of $6,300.
The move to prepay property taxes before Jan. 1 might cause some confusion in the spring, when homeowners receive their initial property tax bill from the treasurer. Yoder said those bills will not reflect any prepayments. "But we have the amount that was paid (recorded), so if there is a difference, they still owe the difference," he said.
The discrepancy comes from the fact that assessments have not yet been finalized, so officials do not yet have a final bill amount for what will come due next summer. Yoder's office is allowing homeowners to pay as much as 5 percent more than the previous year's bill, and if that exceeds the final bill, they would be refunded.
Those interest in prepaying their property taxes can appear in person at the treasurer's office, 141 S. Main St., or they can send their payment through mail. Yoder says as long as the mail is postmarked in 2017, it will be accepted.
The Associated Press contributed to this story.