Sarlo Legislation Allows Prepaid Property Taxes

TRENTON – The Senate today approved legislation sponsored by Senator Paul Sarlo that permits taxpayers to make dedicated prepayment toward anticipated property taxes, allowing homeowners to prepay any quarterly property tax installment prior to the issuance of the tax bill for that installment.

The Senate voted to accept recommended revisions from the governor. The bill, S-1971/A-3382, was also approved by the Assembly today.

“The federal tax law is a real punch in the gut for homeowners in New Jersey because it sharply reduces the SALT deduction for local taxes,” said Senator Sarlo. “This may be only a temporary remedy but it will help our residents to cushion the financial blow. Those who took what they considered the necessary step of prepaying their property taxes before the end of 2017 need to be protected.”

The bill would allow for early property tax payments to be made through dedicated prepayments, defined in the bill as a payment toward an anticipated quarterly installment.

The new federal tax law limits individual’s maximum state and local property tax deductions to $10,000.

In anticipation, many New Jersey residents prepaid some or all of their 2018 property taxes. These prepayments were made to deduct those amounts on their federal income tax returns and reduce their federal income tax liability before the new federal income tax rules took effect.

Under current law, a municipal tax collector is only required to receive prepayments toward any property tax or assessment if the governing body of a municipality has passed a resolution to that effect. The bill would amend current law to permit property taxpayers to make prepayments toward property tax and assessments at any time during the year without prior authorization from the governing body of the municipality.

Upon receiving a dedicated prepayment, the tax collector would be required to issue a receipt of payment. If the amount paid exceeds the total property tax, the bill would require the municipality to refund the excess amount within 60 days. If the amount paid is insufficient the difference would be collected or paid as other taxes are collected. In addition, when a mortgage company pays a property tax and the property owner has made a dedicated prepayment toward that tax, the municipality is to provide a refund.

The provisions of this bill are to apply to any property taxpayer who attempted to prepay a third or fourth quarter property tax installment for tax year 2018 in calendar year 2017.