NC residents scramble to prepay property taxes before federal laws change

A line of people looking to pay off their 2018 property taxes greeted Wake County Revenue Department staffers when the office opened Thursday morning. The stream of taxpayers into the office and calls to ask questions continued through much of the day.

"It's certainly a new dynamic," county Revenue Director Marcus Kinrade said. "We do get a rush of people who do come in at the last minute to pay, right before the delinquency date. It's unique having people rush in to prepay before the end of the year."

Tax changes signed into law last week by President Donald Trump cap the itemized deduction for state and local taxes paid, including property taxes, at $10,000. Under current rules, there is no limit to the deduction.

Kinrade said almost 900 people have prepaid 2018 taxes already. In a typical year, fewer than 100 people do so, he said.

"Given the changes in the tax law, I think this is a good strategy to be able to get the deduction for next – well, there will be no deduction next year, so to get as much as I can this year," taxpayer Carol DeVita said.

The guidance has created confusion among county tax offices across the Triangle.

Officials in Wake, Orange and Cumberland counties all said they are accepting prepayments in person – cash or check – and via checks mailed in, provided they are postmarked by Dec. 31. Durham County officials said the IRS statement precludes them from accepting prepayments, as county tax rates won't be set until local budgets are approved in June. The money from any Durham County resident who tries to pay 2018 property taxes early will be put in a special fund that won't be touched until the 2018-19 fiscal year starts in July, officials said.

Kinrade said that prepayments in Wake County are based on estimates of taxes due under current tax rates. Taxpayers would have to pay the balance next year if county or local rates change next year, he said. Normally, the county issues tax bills in July, and they must be paid by September.

"It can't hurt for them to prepay," he said. "If it doesn't work out [for an income tax deduction], their taxes are paid."

Heipeng Chen said he hopes it does work out.

"I heard that, if I prepaid taxes, there would be savings down the road. That's the motivation," Chen said.

Christopher McLaughlin, a professor of public law and government at the University of North Carolina at Chapel Hill, said that, under IRS guidelines, it appears unlikely that prepaid property taxes would qualify for a deduction on 2017 federal tax returns.

"[W]e are all just guessing at this point. We really don’t know how the IRS will resolve this issue until it starts processing 2017 tax returns," McLaughlin wrote in a blogpost.