More than 5,000 homeowners in Montgomery County rushed to prepay their 2018 property taxes in the waning days of December, after the County Council came out of holiday recess to pass emergency legislation allowing them to do so.
The payments were a last-ditch attempt to claim a tax deduction that will be capped starting this year as part of the broad tax overhaul passed by Congress last month.
A day after Montgomery approved its bill, the Internal Revenue Service announced taxpayers could deduct prepayments only if their properties had already been assessed for 2018.
That means those who prepaid in Maryland, and in neighboring Virginia, are almost certainly out of luck.
A number of jurisdictions in Virginia, which has allowed prepayment for years, say they are exploring whether they can issue refunds to those who want them. Montgomery’s law does not allow for refunds, but Hans Riemer (D-At Large), council president, said lawmakers may try to change that when they end their recess later this month.
“I don’t know that we’re done with this issue,” Riemer said. “I think we’re going to have to continue with it later in January, and of course we’re going to have to continue understanding the fallout of the federal tax bill. That’s hardly done.”
Riemer said the majority of Montgomery residents who prepaid did so knowing that tax experts were still divided on whether those checks would be deductible. A signed form residents had to submit with their prepayments said as much — in capital letters, to make sure people saw it.
Riemer said the council has still been contacted by people seeking refunds.
The day after the council passed its prepayment law, 700 residents showed up at county offices to prepay taxes in person, according to Patrick Lacefield, a spokesman for Montgomery County Executive Isiah Leggett (D). Those payments totaled about $8 million. Another 1,500 residents paid in person on Dec. 28.
As for the thousands of prepayments submitted by mail, Michael Coveyou, chief of the finance department’s treasury division, said all envelopes postmarked by Dec. 31 hadn’t necessarily reached county offices yet. He said the finance department received more than 20 boxes of mail on Tuesday and Wednesday, with the latest shipment set to arrive Thursday afternoon.
“This might be the last day we get a large amount of mail from last week,” Coveyou said. “I’m just hoping this is the last day.”
The District said Wednesday that it had collected $50 million in prepayments from about 7,500 taxpayers. Officials believe those taxpayers will be able to claim the deduction, because the city has already assessed its properties.
Coveyou said few Montgomery residents seemed bitter over the prospect of not receiving a deduction.
“They were thinking, ‘The worst thing is I’ve prepaid my 2018 taxes, and the bill I get in July will be significantly smaller than what it normally is,’ ” he said.
LeRoy Walters, who lives in Bethesda and testified at the council’s public hearing on prepayment legislation, said it was worth the effort by local lawmakers and taxpayers who hoped early payments would be deductible.
He said it remained to be seen whether Congress will revisit the tax plan and, specifically, the issue of property tax prepayments.
“I’m not holding my breath,” Walter said. “I feel satisfied that everyone in Montgomery County acted in good faith and did what they could.”
Perry Stein contributed to this report.