When the dust settled and the checks were cashed, Hopewell Township property owners ponied up around $10 million in pre-payments of their 2018 property taxes by Dec. 31, Hopewell Township Committee learned last week.
Hopewell Township property owners rushed to the Hopewell Township Tax Collector’s Office or mailed in their payments by Dec. 31 for their February and May quarterly property tax bills. Property owners in other towns likewise paid ahead – in some cases, all four quarterly payments for 2018.
Those property owners were scrambling to take advantage of the unlimited deduction of expenses – including property taxes – to reduce their taxable income at the federal level for the 2017 tax year.
That’s because beginning this year, the new tax reform law puts a $10,000 cap on the amount of state and local taxes – including property taxes – that a taxpayer can claim as an expense to reduce the amount of income that will be taxed at the federal level.
Hopewell Township Administrator Elaine Borges told Township Committee that the township collected about $800,000 to $900,000 in pre-paid quarterly property taxes for 2017, compared to about $10 million to pre-pay the 2018 property taxes.
But the extra money does not amount to a windfall for Hopewell Township or the other entities for which it collects property taxes – such as Mercer County and the public school district – nor does it mean the township has extra money to spend, Borges said.
“A lot of people have stopped me in the hall [at the municipal building] and said, ‘Now you are going to spend all of that [money],’ but that’s not the case at all,” Borges said. “Just because there is a lot of money in the bank, we are not authorized to spend it.”
A municipality can only spend the money that has been earmarked for expenditures in the town’s annual operating budget, Borges said, adding that “people have to understand, the spending mechanism is the budget.”
Mayor Kevin Kuchinski reinforced the point that the decision to allow New Jersey property owners to pre-pay their 2018 property taxes was the result of a bi-partisan consensus by state lawmakers.
“We told everyone to rely on their own tax adviser, but [the pre-payment of 2018 property taxes] was done to let residents claim a larger deduction [against their 2017 income],” Kuchinski said.