Hennepin County property owners hoping to benefit from a vanishing tax break paid $198 million in advance taxes last year, more than 30 times what was prepaid in 2016.
Taxpayers lined up to pay before the end of 2017 in hopes of a bigger deduction on their federal tax form. Unfortunately, the Internal Revenue Service still doesn’t have a definitive answer whether the early efforts will pay off.
The rush to pay taxes in advance was prompted by the newly enacted federal law that will cap the annual state and local tax deduction at $10,000 as of Jan. 1. That change created an unprecedented surge in prepayments across the nation.
A state Department of Revenue spokesman previously said that the Internal Revenue Service will determine whether property taxes prepaid in 2017 will be deductible on next year’s federal income tax returns, based on the IRS’ reading of state and local laws.
The IRS has said that what matters is whether property taxes are assessed by the end of 2017, but it wasn’t clear what “assessed” meant.
Meanwhile, with all this extra cash in hand, the county may be able to take advantage of some special financing that could save all taxpayers some money down the road.
In 2017, residents paid advance taxes on 28,458 parcels. In 2016, $6 million was prepaid on 750 parcels. Overall, the county will collect about $2.5 billion in property taxes.