Starting on New Year’s Day 2018, federal deductions for state and local taxes will be capped at $10,000.
That’s among the changes in the GOP tax reform bill signed by President Trump over the Christmas holiday, and experts say it’s going to slam New Jersey, which ranks among the highest-taxed states in the nation.
The $10,000 cap is less than half of what the average homeowner claims in the Garden State, where property taxes alone exceed that amount for about one-in-four single-family homes, according to The Star-Ledger.
Many hard-working families will pay more taxes as a result of the new law, which “will also damage our state’s housing market and business environment,” said Rep. Rodney Frelinghuysen (R-11th Dist.), who voted against it.
Gov. Chris Christie this week issued an executive order requiring all New Jersey municipalities to accept pre-payments of 2018 local property taxes through Dec. 31, 2017, in hopes that residents can claim higher deductions one last time, on this year’s federal income taxes.
Morristown has issued property tax bills for the first two quarters of 2018; instructions for paying them online this weekend are here.
Morris Township will accept pre-payments online, by mail (postmarked no later than Dec. 31, 2017), or left in a drop box at the Township municipal building this weekend. Instructions are here.
There is no guarantee that the federal government will allow deductions for these prepayments, and both municipalities advise consulting with tax experts.
Morris Plains did not post pre-payment instructions on the borough website.
COOLER HOUSING MARKET?
The new tax law also reduces maximum deductions for mortgage interest from the present $1 million down to $750,000.
Together, these changes could cool the region’s housing market, according to the Washington Post. By the summer of 2019, home prices in the New York metropolitan area may be 10 percent lower than they would have been without the tax reform, a Moody’s analyst told the paper.
Some prospective home buyers may take a wait-and-see attitude, opting to rent instead of buy, other experts told the Post.
Tax officials in Greater Morristown say a big chunk of homeowners will be affected by the $10,000 cap on local property tax deductions.
Morristown has more businesses and industry than the Township or Morris Plains. Nonetheless, it has some very expensive residential properties.
Town Tax Collector Linda Windstead reports that 1,482 properties out of 4,325 in town pay more than $10,000 in property taxes.
Excluding commercial properties, Morristown has 3,597 Class 2 homeowners (Class 2 refers to places housing up to four families), and 1,303 of them paid more than $10,000 in property taxes for 2017, according to Tax Assessor Kevin Esposito.
Some 600 of them paid more than $13,800, and stand to lose the most in deductions.
In Morris Township, some 3,297 Class 2 homeowners–about 43 percent of the 7,748 total–topped $10,000 in local property taxes, said Township Tax Collector Rebecca Roth.
In Morris Plains, the average home price is $438,146 and the tax rate is 2.221 percent, reports borough Tax Collector Ava Thomas.
That works out to an average annual tax bill of $9731 — meaning that just under half of Morris Plains households could be affected by the $10,000 deduction cap.
Kevin Coughlin contributed to this report.