HELENA- If you’re among the Montana households whose state and local taxes top $10,000 a year, Friday is the last day you can take advantage of a full deduction on your federal tax return – by paying your last 2017 property-tax payment early.
Under the Republican tax-cut bill enacted by Congress last week, any deduction from your federal taxable income for state-and-local taxes will be capped at $10,000, starting in 2018.
That change has prompted some Montana taxpayers to pay their entire 2017 property-tax bill early, to be able to claim their full deduction one last time, state and local tax officials say.
“We’ve had several people come in and pay the May (property-tax payment),” says Lewis and Clark County Treasurer Paulette DeHart. “But not a big rush, not lines. We’ll see what tomorrow brings.”
Still, state revenue officials indicated Thursday that not many Montanans are affected by the change.
Department of Revenue analyst Ed Caplis told MTN News that only 2,111 Montanans owed more than $10,000 in property taxes this year.
Records don’t show precisely how many Montana taxpayers have a combined property- and state income-tax bill that exceeds $10,000, but it’s likely no more than 10,000 to 20,000 taxpayers – most of them at the upper end of the income scale.
For tax year 2017, most taxpayers can deduct all of their 2017 local and state taxes on federal tax returns, reducing their federal taxable income.
Those deductible taxes include 2017 property taxes – but those property taxes must be paid in the current calendar year to be claimed as a deduction on your 2017 federal return.
In Montana, however, the second half of one’s annual property taxes aren’t due until the following May, and most people wait until then to make the payment. That second payment can be deducted in 2017 only if it’s paid by Friday – the final work day of the year.
DeHart said some taxpayers have asked if they can pay their 2018 property taxes in advance this year, to claim an even bigger deduction. The answer to that question is “no” – because those taxes won’t be levied or billed until well into next year.
“We would have to have the state law changed to allow us to take partial payment (on future taxes),” she said. “At this point in time, we cannot take any 2018 property tax payments.”