What To Know About Prepaying CT Property Tax

HARTFORD, CT — Tax collector offices across Connecticut are fielding thousands of inquiries as taxpayers attempt to squeeze the most out of federal deductions by paying local property taxes before the new law goes into effect.

The new tax law limits the amount of state and local taxes that can be deducted from federal returns to $10,000. The change has caused many to rush to tax collector offices in hopes of prepaying next year’s local property tax bills in order to claim them as paid in the current tax year.

The deduction is often taken in high tax states like Connecticut.

President Donald Trump signed the bill into law Dec. 22, leaving little time for taxpayers to figure out the tax situation.

The IRS has issued guidance that under certain circumstances local real property taxes paid in 2017 could be deductible.

“In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018,” the IRS said in a statement. “A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.”

Some cities and towns including Stamford are allowing residents to prepay their January and July installments, but many are not. The City of Stamford cautioned residents that prepaying July payments may not necessarily mean the payment would be deductible on a federal tax return. The July prepayment would function as a credit on the next tax bill as a mill rate for the next fiscal year hasn’t been set.

Connecticut budget secretary Ben Barnes said it appears that prepaying January tax bills in December is one way to take advantage of the expiring deduction.

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