An estimate 5,000 Fairfielders pay taxes to avoid hit
FAIRFIELD — An estimated 5,000 residents paid their January and April property tax bills early, apparently in an effort to reap at least some of the benefits of a federal tax deduction.
As part of the tax cut bill passed by Republicans in Congress in December of 2017, the deduction for state and local taxes is capped at $10,000, and for residents of states like Connecticut, and towns like Fairfield, that could mean a higher federal tax liability.
Tax Collector David Kluczwski said it is hard to determine the exact number of residents who paid early because the system the town uses records payments by installment. “If I had to estimate, I would say that roughly 5,000 residents took advantage of paying their January and April installments early in the month of December,” he said.
The dollar amount, he said, equates to $27 million in payments — “roughly 24 million more than we collected in real estate taxes” for December, 2016.
Only taxes for which a tax bill has been sent can be paid early.
There has been talk in other high tax states, like California and New Jersey, to take advantage of a loophole that apparently allows municipalities to set up a charitable fund. Residents who make a donation to the fund can then receive a corresponding property tax credit from the town. Regulations on charitable donations did not change under the new tax laws.
For example, if your property tax bill is $12,000, you could conceivably make a $2,000 donation, reducing your property tax bill to $10,000, thanks, to the credit. Then, you would be able to deduct both the $10,000 property tax as well as the $2,000 donation.
“After hearing about towns in other states, I asked our tax attorney to look into the matter,” First Selectman Mike Tetreau said. “It is his opinion that it would be possible, but we need enabling legislation from the state.”
Tetreau said the town’s state delegation, through state Rep. Cristin McCarthy Vahey, D-133,is looking at what can be done to help town. He said he is also following up with the Connecticut Conference of Municipalities to see how many other towns would be interested in seeing such legislation passed.
Vahey said the legislature’s Finance Committee is expecting a report from the Department of Revenue Services on the possibility of such legislation. “I’ve already talked with Finance Committee leadership,” Vahey said, adding she has had offers of help from professionals in the tax field.
“We’re going to do everything we legally can to provide help to our residents,” Vahey said. “This is pretty significant for them.”
Kluczwski said this approach is not something that has been discussed or brought up to the Connecticut Tax Collector’s Association at this point. “However, I am co-chair of the legislative committee for the state Tax Collector’s Association so this is something I will be on the lookout forfor when the session begins up in Hartford, and proposed legislation is brought to our attention,” he said.
Board of Finance Chairman Tom Flynn said there are “many moving pieces to this right now and I don’t have an informed opinion right now until the dust settles.” However, he said, “I am certainly in favor of options that will allow taxpayers to lower their tax liabilities.”