Long lines at tax offices as homeowners try to beat hike

In this Dec. 26, 2017 photo, people line-up at the Town of Hempstead tax receiver's office to pay their real estate taxes before the end of the year, hoping for one last chance to take advantage of a major tax deduction before it is wiped out in the new year. In Hempstead, town Tax Receiver Donald Clavin said "thousands" of people packed his office Tuesday trying to pay their 2018 property and school taxes a year in advance. (Howard Schnapp/Newsday via AP)

The Associated Press

People across the United States rushed this week to pay their 2018 property taxes early, hoping to take advantage one last time of a federal deduction for state and local taxes that will be scaled back under the tax-code overhaul signed by President Donald Trump.

On Wednesday, however, the Internal Revenue Service announced that those prepayments could be deducted only in limited circumstances, a decision that appeared to invalidate many taxpayers' efforts and raised the prospect that local governments could come under pressure to refund millions of dollars.

The announcement stoked confusion surrounding one of the most controversial elements of the tax law - a $10,000 cap on deductions for state and local taxes that will disproportionately affect higher-tax, Democratic-leaning states. It also offered a glimpse of the kind of hiccups that could arise in coming weeks as the IRS releases guidance on other facets of the bill, the largest overhaul of federal tax law in three decades.

In affluent states with high taxes and property values, local officials have been besieged in recent days by people trying to pay their 2018 property taxes early so they can deduct those payments before the cap takes effect.

However, the IRS said Wednesday that filers could only avoid the cap by paying property taxes that have been assessed in 2017. Many local governments have not completed assessments for upcoming years.

Critics said the last-minute confusion underscored the haste with which Republicans passed their tax bill, completed in record time for such a far-reaching piece of legislation.

"This is not the way to do legislation that will massively impact the entire economy. It sets off a flurry of action from people trying to save money, and they act as rash as the legislators who pushed this thing through," said Philip Hackney, a tax expert at Louisiana State University.

That confusion was echoed among taxpayers - some following the advice of their accountants - who interrupted their holiday activities to line up in sub-freezing temperatures at tax offices.