Thousands of residents in central Indiana pre-paid their property tax bills before Jan. 1, resulting in more than $31 million in early payments, according to research by IBJ.
It’s not clear how many of the payments were being made early to try to take advantage of an income tax deduction that will soon change because it's not unusual for some people to pay in advance, but the amount of early payments marked a significant increase for some areas.
In Marion County and the surrounding doughnut counties, at least 15,800 taxpayers opted to pay their property taxes in advance, bringing in more than $31 million.
In Hamilton County, one of the wealthiest counties surrounding Indianapolis, about 3,000 residents made $14.5 million in early property tax payments in 2017—up from only 700 homeowners paying $835,000 in 2016.
The federal tax overhaul signed by President Donald Trump in December puts a $10,000 limit on a deduction that lets homeowners reduce their taxable income by the amount they’ve paid in state and local taxes. The deduction previously did not have a limit. Some taxpayers are hoping they'll be able to claim the deduction without the limit by paying more taxes in 2017, but it’s unclear what the IRS is going to allow.
The IRS has said that some homeowners who paid real estate taxes early will be able to claim the deduction—but only if the taxes were assessed, billed and paid in 2017. The IRS said homeowners won’t be eligible to claim the payments if they guessed at what the 2018 assessment would be and then paid that amount.
But Josh Sickler, an accountant with Noblesville-based Platinum Accounting (formerly known as Bastin, Dorrell & Snyder LLC), said he and his partners talked to clients about it, and, depending on the situation, suggested paying in advance despite the uncertainties.
In Marion County, about $13 million in property taxes was prepaid on roughly 12,200 parcels by the end of the year. At the end of 2016, the county took in less than in half of that amount in prepayments, or about $6.1 million.
Marion County Treasurer Claudia Fuentes said the office was busy with “an influx of inquiries" about whether the prepayment would allow people to take a deduction on their taxes—something the county couldn't give advice about.
“It would be up to a tax adviser to allow them to understand whether they can take a deduction or not,” Fuentes said.
Fuentes said payments will be posted once the bills are due later this spring. Taxing units will not receive funds any earlier than last year, she said.
In Boone County, no residents paid in advance in 2016. But, in 2017, nearly 300 residents made early payments, totaling $1.7 million.
“So for us, it was a huge, huge influx of payments,” Boone County Treasurer Debbie Ottinger said. “It was a surprise for everyone.”
In Johnson County, 2017 prepayments at the end of the year totaled $1.3 million, compared with about $100,000 the previous year.
The trend of paying early was also evident in smaller central Indiana counties.
In Hancock County, treasurer Janice Silvey said about 150 people prepaid, which amounted to close to $300,000. Silvey couldn’t provide information for 2016, but said it did seem like more people than usual were paying in advance.
In Morgan County, at the end of 2016 there was about $9,160 in the advance payment fund. At the end of 2017, the fund had $121,750.
“We took in significantly more than we did in years past,” Treasurer Julie Minton said. “We were busier."
Shelby County treasurer Kathy Plunkett said her office typically receives $100 here or there on prepayments from a couple of individuals. But before the end of this year, 32 people came in to pay $91,347.
“We’ve never had anyone come forward like this,” Plunkett said.
Madison County Treasurer Kelly Gaskill said the county doesn't usually separate early payments from other payments made near the end of the year, but she estimated they received nearly $118,000 in 2016 and that increased to about $346,000 in 2017.
Hendricks County Treasurer Shawn Shelley would not provide any figures, saying she couldn’t differentiate between which payments were made due to the new tax law and which payments would have been made otherwise. “Any analysis would not be correct and possibly misleading,” she said.