OCEAN CITY — A couple of days ago, John McCall received a call from his accountant urging him to prepay his 2018 property taxes, so he could take advantage of a deduction that is set to expire under the newly enacted federal tax code.
McCall and residents in high-tax states, like New Jersey, are scrambling to pay their taxes before a $10,000 cap on state and local tax deductions goes into effect Jan. 1. The provision is part of a new tax federal tax code signed into law by Republican President Donald J. Trump earlier this month.
On Friday morning, a steady stream of people came and went from the Ocean City Tax Collector’s Office to prepay their 2018 property taxes.
“My accountant called me and told me this was a one-shot deal where I could possibly save $500,’’ McCall, 65, of Ocean City, said after paying his taxes.
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On Wednesday, Gov. Chris Christie signed an executive order requiring towns to accept property-tax prepayments for 2018.
“This Executive Order will not only save thousands of dollars for countless New Jersey families, but also provide municipalities with a prepayment windfall that they will be able to invest and use the interest for the benefit of their taxpayers,” state Senate President Steve Sweeney said.
Frank Donato III, director of financial management for Ocean City, said traditionally the city carries a balance of prepaid taxes, but this year that number is tripled.
In a normal year, the city would have a prepaid tax balance of about $2.5 million. This year, that balance is expected to be more than $8 million, Donato said.
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“I knew that there was going to be more activity ever since I read the details of the federal tax law, but honestly, I didn’t expect this level of activity,” he said.
Around the state, some tax collector’s offices are opening Saturday to deal with the rush. The Ocean City Tax Collector’s Office will be open from 9 a.m. to 1 p.m. Saturday. Taxpayers can also pay online.
In Avalon, where the average property is valued at $1.3 million, taxpayers have been coming in to pay their taxes for 2018. The average tax bill in the affluent oceanfront community is more than $7,200, according to records.
“A couple of hundred people have either inquired or paid their taxes for the first two quarters of 2018 to take advantage of the deduction,” said Scott Wahl, business administrator in Avalon. “Avalon property owners are certainly interested in this, and taking advantage of it.”
But the IRS warned earlier this week that some prepaying their taxes might not get the benefits that have been touted.
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The IRS said some homeowners who prepay local property taxes due in 2018 will be able to claim the deduction on this year’s returns, but only if the taxes have already been assessed and billed. People can’t guess at what next year’s assessment might be, pay it now and claim a deduction for that amount.
“A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017,” the IRS said on its website.
Bill Brydges, 61, who owns a second home in Ocean City, said he had to take advantage of the deduction. Brydges pays $17,000 a year in taxes between his Ocean City home and his house in the Philadelphia suburbs.
“I don’t want Uncle Sam taking any more of my money,” Brydges said.
The Associated Press contributed to this report.