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DC collects more than $50M in prepaid property taxes

DC collects more than $50M in prepaid property taxes
© Greg Nash

The District of Columbia government said it collected more than $50 million in prepaid property taxes from 7,500 taxpayers as homeowners rushed to limit the federal tax increases they may face under the new tax law.

The office of D.C.'s chief financial officer released the preliminary data on prepaid property taxes on Wednesday.

The new tax law caps the state and local tax deduction at $10,000, starting in 2018. As a result, scores of homeowners in high-tax areas rushed to prepay their property taxes at the end of 2017 so that they could deduct the full amount on their 2017 federal tax returns.

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But the IRS issued guidance last week that restricted the number of taxpayers that could get a tax benefit from prepayment, saying that prepaid property taxes are only deductible if the taxes were both assessed and paid before the end of 2017.

The D.C. CFO's office said that residents of the city would still be able to deduct prepaid property taxes in light of the IRS ruling since properties were assessed and tax liabilities were set in 2017. But other jurisdictions in the Washington region said they aren't assessing 2018 property taxes until the year started.