Governor pledges state efforts to ease burden of deduction limits
By Liz Schevtchuk Armstrong
Homeowners often hold off paying taxes as long as possible. But many Highlands residents rushed to pay theirs before the Jan. 1 arrival of reductions in the federal write-off for state and local taxes.
Philipstown received $2.668 million in early payments on 2018 tax bills, said the town’s tax collector (and clerk), Tina Merando. She opened her office on Saturday morning, Dec. 30, to allow residents to get their payments in before the end of the year.
In Beacon, Finance Director Susan Tucker said the city collected $288,688 in early payments. Her office received “several hundred phone calls” during the last week of the year, she added. “We couldn’t even answer all of them.” Residents also stopped by in person during what is usually a slow time. “It was pretty crazy.”
Adopted just before Christmas, the overhaul limits deductions for local and state taxes to $10,000 on itemized tax returns. By paying local property taxes (state income taxes were ineligible) before 2017 ended — instead of in early 2018 — residents hope to claim the fuller deduction one last time, if the Internal Revenue Service goes along.
To accommodate taxpayers in New York, one of the states hit hardest by the new federal law, Gov. Andrew Cuomo authorized municipalities to accept early payments on 2018 bills. Those that did included Beacon and Philipstown. Local school districts and the villages of Cold Spring and Nelsonville, whose budget cycles do not coincide with the calendar year, did not participate.
Second Home Hit
The new tax law also affects owners of second homes by reducing from $1 million to $750,000 the total amount of mortgage debt on which interest can be deducted on itemized returns for houses purchased after Dec. 15, 2017. If your primary residence is worth $750,000 or more, that change eliminates the mortgage-interest deduction for any second home purchased after Dec. 15. The new law also eliminates the interest deduction on new and existing home-equity loans beginning in 2018.
In his State of the State Address in Albany on Jan. 3, Cuomo called the new federal tax law “an assault on New York.” Limiting deductions on state and local property taxes, he warned, “effectively raises middle-class families’ property and state income taxes by 20 to 25 percent.” He said his administration plans a three-prong response:
- A lawsuit challenging the tax law as “unconstitutional — the first federal double taxation in our nation’s history, violating states’ rights and the principle of equal protection”;
- A New York-led national “repeal-and-replace” campaign; and
- A pursuit of “a major shift in tax policy” at the state level by restructuring the income-and-payroll-based system and possibly funding public projects through charitable donations.
On Jan. 9, two members of Congress from New York, Democrat Nita Lowey and Republican Peter King, introduced legislation to repeal the section of the tax law that limits the deductibility of state and local taxes. According to the Tax Policy Center, the limit is expected to bring in $36 billion in revenue to the U.S. Treasury in 2018 and $644 billion over 10 years.