Secured Property Tax Bill
Property Tax Bill

Last minute rush to pay property taxes before new tax law takes effect

Author: Auditor-Controller-Treasurer-Tax Collector
Date: 1/9/2018 10:10 AM

Local taxpayers and property owners rushed to pay 2017-18 taxes and pre-pay 2018-19 at the end of December, inundating the County Tax Collector’s Office on the last business day before the new Federal tax law went into effect.

The County saw a nearly 400% increase in tax payments in the last five business days of 2017 compared to the prior year. Tax payments went up to about 8,500, compared to about 1,800 in 2016.

A key provision in the recently passed Federal tax reform legislation, which took effect on January 1, 2018, impacts many Californians who itemize deductions totaling more than $10,000 for State, local and property taxes. This change does not affect taxpayers who do not itemize deductions and instead take the standard deduction, nor does it affect taxpayers whose itemized deductions total less than $10,000. As such, most of the affected taxpayers have above-average incomes and property values. However, because California has a disproportionate share of the nation’s higher incomes, as well as expensive real estate, California taxpayers are disproportionately affected.

At the end of 2017, many websites and news articles suggested that taxpayers should pre-pay any taxes on which the new $10,000 limit applied before December 31, 2017. This would enable most to deduct those taxes fully in 2017. One obvious candidate for such prepayments is property taxes, which the County processes.

Some local taxpayers even attempted to pre-pay 2018-19 taxes at the end of 2017, even though those have not been calculated or assessed yet, by guessing at the amounts, and mailing in checks, or attempting to pay in person. In response to similar situations across the nation, the IRS issued a ruling that future years’ taxes cannot be deducted from Federal income taxes before the taxes are assessed. So even if the County accepted a deposit against future year’s property taxes, the payment could not be deducted.

In California, property taxes are assessed annually on a fiscal year basis, from July 1 to June 30. They are due in two installments. The first installment is due on November 1, and becomes delinquent on December 10. The second installment is due February 1, and becomes delinquent on April 10.

The County Tax Collector’s Office accepted and processed every legitimate payment received on taxes from 2017-18, as well as any prior years.