Property owners in high-tax states around the nation are trying to pay their property taxes now to avoid deduction limits that kick in next year, but King County isn’t accepting any early checks.
With Congress last week passing an overhaul to the nation’s tax code that includes new limits on property-tax deductions, financial planners across the country are advising some of their clients to pay their property tax bills for 2018 early.
But King County is telling property owners to hold on: If you do mail a check now, it’ll be sent back.
Starting next year, taxpayers will only be able to deduct up to $10,000 in combined property and sales taxes. Before, there was no cap. This only affects people who itemize their deductions.
People who want to avoid the new $10,000 cap can prepay their taxes now before it takes effect next year — and media reports indicate that’s happening in high-tax areas like California, New York, D.C. and New Jersey.
Inquiries have been flowing into the King County Assessor’s Office from local property owners who would like to do the same.
But Washington state bars counties from collecting tax payments until the full tax roll is certified, which isn’t expected to happen until January.
Basically, local officials don’t know yet what your property tax bill will be for next year. It’s definitely going to go up, but it’s not clear yet by how much, said Bailey Stober, a spokesman for the assessor’s office.
The local property-tax system is convoluted — it’s not just a matter of multiplying last year’s rate by your new assessed value. There are new and changing tax rates, caps on how much governments can charge, several government agencies all collecting pieces of the tax pie, utilities that cross county lines, and new construction that helps spread the total tax burden across more properties.
Stober said the assessor is still waiting on all the local and state agencies to send their budgets and construction totals before it can calculate everyone’s bill.
If it jumped the gun and sent bills now without that full information, some agencies might get less funding than they’re supposed to, and property owners with complicated bills like Comcast and other utilities could end up paying less than their fair share, he said.
So why can’t you just send the county a bunch of money now for tax purposes, then settle up when the final bill comes due?
“If they mail a check, it is just floating in treasury with nowhere to be applied, which we simply can’t do for 700,000-plus parcels of land in the county,” Stober said. They’ll just send back any checks that do come, he added.
Prepaying won’t help a ton of people here, anyhow. For starters, only 30 percent of Washington residents itemized local taxes last year, a rate that will probably go down with the new tax law as the standard deduction is set to nearly double next year.
And for those who do itemize, they probably won’t hit the new $10,000 limit on combined property- and sales-tax deductions. The typical property-tax bill in King County last year was $5,660 — and lower still in Snohomish and Pierce counties — while sales-tax deductions statewide averaged about $2,650. That puts the average taxpayer under the $10,000 cap.
Still, people with high property-tax bills will be hit — at least under this particular provision. The typical homeowner in places like Medina, Mercer Island and West Bellevue will exceed the $10,000 cap and lose some of their property-tax benefits under the new tax system (though wealthier people generally will do just fine under the new tax bill, altogether).
The new cap doesn’t affect businesses like landlords and commercial property owners who own large properties like triplexes, apartments or offices.
King County property-tax bills have grown 7.8 percent a year, on average, over the past four years. If that trend continues, the typical tax bill countywide in 2018 would increase about $440 over this year, to $6,100, but it’s too soon to know exact numbers.
Bills will be sent out by Valentine’s Day for people who get them directly (others pay through their mortgage lender).
Correction: This post has been updated to reflect that the cap doesn’t apply to business owners.