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December 28, 2017

To save later, Philly homeowners paying 2018 property taxes now

But many suburban residents cannot take advantage of the prepay benefit

City Hall Property Taxes
Stock_Carroll - Rowhomes in Queen Village Thom Carroll/PhillyVoice

Colorful rowhomes in Queen Village.

The number of Philadelphia homeowners prepaying their property taxes has more than doubled this December, a surge likely attributable to the tax reform bill signed into law last week by President Donald Trump.

The city's revenue department has received about 14,000 payments for $32 million in 2018 real estate taxes in December. Last December, the revenue department received about 6,000 pre-payments totaling $4.9 million.

By prepaying their property taxes, those homeowners can avoid a new $10,000 cap on the amount of state and local taxes that can be deducted from their incomes when determining their federal tax liabilities. Taxes paid in 2018 will be subjected to the cap.

"We anticipated there would be an increase, but I think we're even a little surprised at how significant this is," Revenue Commissioner Frank Breslin said. "But that's a good thing."

The tax reform bill, passed by congressional Republicans earlier this month, stipulates that income taxes cannot be paid early. But the Internal Revenue Service announced on Wednesday that homeowners can deduct their 2018 property taxes on their 2017 returns – if the taxes are assessed and paid this year.

Breslin held a press conference last week, encouraging Philly homeowners to consult with their tax advisors to see whether such a move could save them money.

"People are definitely hearing this and going out and doing it," Breslin said. "It might make sense. It's an opportunity for them to reduce their 2017 taxes and may increase their refund."

But while Philly homeowners can take advantage of this opportunity, not everyone in Pennsylvania can. Only municipalities that govern under a Home Rule charter are eligible.

Homeowners in Bucks, Chester and Montgomery counties cannot prepay their county property taxes, though homeowners in Delaware County can.

Montgomery County officials have been forced to turn down numerous homeowners who have inquired about prepaying their 2018 property taxes. The county released a statement Wednesday acknowledging Pennsylvania law prevents it from accepting the early payments.

Montgomery County "must work within the confines of the tax collection requirements," the statement read. "As these requirements explicitly prohibit the prepayment of real estate taxes, Montgomery County is prohibited from accepting 2018 real estate taxes until after the first of the year."

Bucks County officials have experienced a similar situation.

Dave Boscola, the county's director of finance and administration, said the county has turned "numerous" homeowners seeking to prepay their county real estate taxes. The county won't have assessments certified until early 2018. Bills won't arrive until early March.

"The federal government is making rules that pertain to 2018," Boscola said. "The state is mandating us, by statute, that we're supposed to collect a certain way. And then the taxpayers are caught in the middle.

"I don't blame them for trying to maximize their deductions. But the course of events did not allow anybody to do anything."

In Philadelphia, which operates under a Home Rule charter, it's a different story.

"Here's it's been assessed, and it's been filled," Breslin said. "All of our respective bills were out weeks ago. Everybody should have a bill in hand."

The city's revenue department will hold regular hours on Friday, enabling homeowners one final business day to submit their prepayments.

But homeowners also can mail their prepayments – as long as the envelope is postmarked by Dec. 31 – or prepay online via the city's website.

"We encourage people to make the payment before Dec. 31.," Breslin said. "If they're up against time, they can take advantage of our electronic payment."

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