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Utahns who rushed to pay next year’s property taxes may be out of luck in their bid for a bigger deduction

Internal Revenue Service says that’s not allowed in states like Utah.

(Mark Lennihan | AP file photo) A 1040 tax form appears on display, Tuesday, Jan. 10, 2017, in New York. The IRS is delaying tax refunds for millions of low-income families as the agency steps up efforts to combat identity theft and fraud. Starting in 2017, a federal law requires the tax agency to delay refunds until Feb. 15 for people who claim the earned income tax credit and the additional child tax credit. The IRS says processing times will delay most of the refunds until the end of February.

  | Dec. 29, 2017, 11:51 p.m.
| Updated: Dec. 30, 2017, 12:41 a.m.

Hundreds of Utahns looking for a last-minute tax break sent checks for next year’s property taxes to their county treasurers.

Taxpayers here and across the country were submitting the payments in hopes of beating a new $10,000 cap on state and local tax deductions that begins next year as part of the massive tax-reform law passed by Congress and signed by President Donald Trump.

But there’s a problem. According to the IRS, people could prepay 2018 property taxes only if those taxes had already been assessed. In Utah, those assessments don’t happen until just after the new year.

“The IRS will probably rule against [these prepayments] qualifying as a 2017 deduction,” Salt Lake County Treasurer Wayne Cushing said Friday. Cushing said he collected about $3 million in 2018 tax payments on about 800 properties.

The prepayments came in recent weeks as Americans scrambled to figure out how the new tax legislation — led in the Senate largely by Utah Sen. Orrin Hatch — will affect their bills in coming years. Cushing said tax advisers told clients to prepay their taxes and count them toward state and local taxes paid in 2017 before the new cap takes effect.

The IRS tossed water on that strategy Wednesday, when it said in a statement people could take advantage of the short window only if local governments had officially set and charged taxes on their homes and businesses for 2018. Utah doesn’t do that, by state law, until after the new year, according to local county treasurers.

“States like Utah that haven’t assessed yet, it was [the IRS] opinion that they wouldn’t qualify for the 2017 deduction if they prepaid for 2018,” Cushing said. “Next week, we might get a lot of requests for a refund.”

Utahns aren’t expected to be hit as hard as higher taxed states like California, Oregon and states on the East Coast. The state Tax Commission hasn’t had time to analyze the effect the federal legislation would have on the state’s coffers and residents. Before last-minute changes, the nonpartisan Legislative Fiscal Analyst’s office estimated the state would collect between $100 million and $200 million more unless Utah lawmakers lowered taxes.

But in anticipation of a deduction that would be limited for higher-income residents, other Utah counties experienced the same rush of 2018 tax payments as Salt Lake County.

“I just advise people to get good advice from their accountant,” Weber County Treasurer John Bond said. “We’re not in a position to give them the advice that many are searching for.”

Lynsi Stone, Summit County deputy treasurer, said she’d been fielding lots of calls Friday, the final business day of the year. But she didn’t have information about how many people had prepaid in the county with a higher-than-average income level and housing prices.

County tax officials started talking with one another to get on the same page. Several said they weren’t giving out tax advice — whether people should prepay or take a chance at an audit from the IRS next year.

“We kind of point them to the IRS,” said Jonathan Lee, chief deputy Davis County treasurer. “We will take the prepayment but tell them it might or might not be deductible” and tell them to talk to their tax advisers.