Gottheimer Works to Save NJ Taxpayers, Shares IRS Guidance on Property Tax Prepayment with Mayors, Council

Dec 29, 2017

Earlier this week, Congressman Josh Gottheimer (NJ-5) urged New Jersey mayors to take swift action to help residents save on assessed taxes in the face of the oncoming Tax Hike Bill. Gottheimer will continue looking for any path to save taxpayers money and continues to look for ways to cut taxes.

On Wednesday, he shared the following letter with Fifth District mayors and council members regarding prepayment of property taxes assessed for 2018:

Dear Mayor — I am proud to stand with you to save taxpayers’ money in every way we can – from fighting to get North Jersey a better return on the dollars we have already sent to Washington to preventing the Tax Hike Bill’s assault on our state and key deductions. Today, that means acting quickly to allow for property tax prepayments to help New Jersey taxpayers.

As you know, the recently enacted Tax Hike Bill, P.L.115-97, significantly revises the Tax Act of 1986, and among its provisions, drastically diminishes the ability for states like ours to deduct state and local taxes (SALT). It’s expected to hit our property values and other states are already trying to lure our businesses away. However, there is an important caveat: the changes, based on guidance we’ve received, specifically does not prohibit prepayment of state property taxes.

Since many taxpayers will not be permitted to deduct all of their property taxes in 2018 and beyond, I urge you to act quickly, so taxpayers in your town can prepay assessed property taxes this week — and potentially save significantly on their federal tax bill. As promised, as soon as the Tax Hike Bill was passed, I asked the IRS for guidance regarding prepayment. My office just received a response from the IRS. Their guidance suggests — coupled with formally posted guidance — that New Jersey taxpayers can prepay their 2018 property taxes and temporarily avoid this disastrous provision of the Tax Hike Bill.

The IRS advised that, “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. 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.”

The IRS note to my office added, “The new legislation specifically prohibits receiving a tax benefit in 2017 for the pre-payment of 2018 income taxes. We were concerned this might apply to property taxes as well, but it does not.”

In New York State, Governor Cuomo issued an emergency executive order last Friday facilitating prepayments in that state. You can read more about New York’s emergency order here. News reports indicate that Governor Christie is planning a similar executive action and I have contacted him to urge swift action and clarity for towns in North Jersey.

Similarly, I am urging you to act quickly on behalf of our shared constituents. I strongly recommend that each town and county look at its rules to determine whether it can accept property taxes due in 2018 and take any steps necessary to authorize prepayment. I believe it is critical to inform and advise taxpayers to pay taxes they are allowed to pay before December 31, 2017, if they will be entitled to the benefit of the deduction. We need to save on taxes wherever possible, particularly in the face of this tax hike on our residents.

Please let me know if you plan to take action on prepayment. My team is prepared to act quickly to help get the word out, as it is in many taxpayers’ best interest to prepay to preserve their ability to deduct these taxes on their 2017 federal tax returns. A couple of caveats: some taxpayers may not benefit from prepayment – for example if they do not itemize their deductions. Some, but not all, taxpayers who pay alternative minimum tax (AMT) may also be denied the benefit for additional payments of state and local tax deduction. Therefore, I strongly recommend that you advise taxpayers to seek their own independent, professional advice on any issues related to the Tax Hike Bill.

Thank you for acting quickly for the good of local residents and businesses. This is about fighting for North Jersey and leaving no stone unturned to save more money for our towns and taxpayers. Please feel free to call 201-***-**** with any questions or email me at *****

Happy New Year and thank you very much for all you do.


Josh Gottheimer

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