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Mar 13, 201812:17 PMOpen Mic

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New tax law makes business property tax assessments even more important

On Dec. 22, 2017, President Trump signed H.R. 1, known as the Tax Cuts and Jobs Act, into law. Among many other reforms, the new tax law limits the amount of state and local taxes that individuals can deduct from their taxable income to a maximum of $10,000 beginning in 2018. Anticipating this new limit, many property owners rushed to take advantage of the still limitless state and local property tax deduction by prepaying their 2018 property taxes in the few days that remained in 2017.

Adding more confusion to the chaos was uncertainty about whether the IRS would recognize prepayment of 2018 property taxes as a deduction on 2017 income tax returns. On Dec. 27, the IRS announced its position that a taxpayer claiming a deduction for prepaid property taxes could do so only if the upcoming year’s taxes had been assessed in 2017. The IRS’ announcement was unwelcome news for Wisconsinites. With very limited exceptions, Wisconsin law prohibits prepaying general property taxes for the following year.

With the new property tax deduction limit, obtaining a fair and reasonable property tax assessment is even more important. Property taxes can amount to a substantial share of the annual operating costs for income-producing properties and any savings go straight to the business’ bottom line. Best of all, obtaining a reduction can potentially save you money for years to come as many municipalities do not change assessments on a yearly basis. This is an area of potential savings that many CFOs and business owners with income-producing properties consistently overlook.

Spring is a good time to begin analyzing and considering potential challenges to property tax assessments. Though the schedule varies, some municipalities will soon begin mailing assessment notices. For example, the City of Madison’s notices are set to go out on April 12. In the meantime, individuals and businesses with income-producing properties are usually able to gather financial statements and data reflecting their property’s performance for the prior year. By analyzing that information now, owners can put themselves in the best position to decide whether to question or challenge their assessments when the notice does arrive.

Joseph J. (J.J.) Rolling is an attorney with von Briesen & Roper, s.c. He focuses his practice on matters involving real estate including eminent domain, drainage problems, and property tax assessments.

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