Deducting real estate taxes paid from your income taxes

*Note:  Please contact a tax professional for tax advice*

If you are itemizing deductions on your 2013 federal income tax return, you can deduct property taxes paid on real property (land and structures) that you own.

Local fees are a different matter.  IRS Publication 530 says that “itemized charges specific to property or persons,” cannot be deducted because they are not “taxes,” even if they are paid to a taxing authority.  The publication lays out specific examples of nondeductible fees, stating that “a periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection)” is nondeductible.

Generally speaking, payments for Decatur’s residential sanitation and stormwater utility, may fall into this category of nondeductible charges.  For a single-family home in Decatur in 2013, the residential sanitation charge was $235, and the stormwater charge was $75.

Other nondeductible payments include penalties and interest on delinquent taxes paid if applicable.

Tax payments toward the five funds listed on Decatur tax bills (capital, DDA, bond, the general fund, and school taxes) are deductible.

If you are deducting real estate taxes paid from your income taxes, you’ll want to keep a copy of your second installment Decatur property tax bill, which is a restatement of your total taxes owed and paid for the year (and a copy of your DeKalb tax bill) in your income tax file.  You can access a bill reflecting your payments or a receipt at www.decaturgatax.com.

This post is intended solely to bring awareness of the distinction that the IRS draws in its official publications on the real estate tax deduction, and is not intended as instructions on how you should file or how much you should deduct.  Since individual circumstances vary, please contact a tax professional for further guidance.

 

Two more days to pay without penalty

Second installment real property tax payments and personal property tax payments for 2013 were due by Dec. 20, 2013.  The City of Decatur has offered a grace period during which no penalties and interest have been charged for late payments, but that grace period ends in 48 hours. 

We honor postmarks, so as long as you mail in your payment no later than Wednesday, Jan. 8, no penalties or interest will be added to your account.

Thanks to the 95%+ residents and commercial property owners who have already remitted their payments!

Lessons for cities from the Target breach

The theft of credit and debit card data from Target stores during the Christmas shopping season is a reminder of the necessity for merchants to incorporate rigorous safeguards into their payment acceptance environment.

The City of Decatur and any other government entities that accept credit card payments qualify as “merchants” under payment card industry (PCI) standards. 

Decatur handles over 10,000 credit card transactions representing over $1 million annually across different departments and facilities.  Although this is a tiny volume of transactions compared to big chain stores like Target, and although we do not use point-of-sale devices such as those suspected in the Target breach (keypads with magnetic stripe readers and digital signature pads), the City is not immunized from the risk of breaches.

We have been working over the past several months on enhancing protections of credit card data for our taxpayers and other paying customers, and have begun receiving vulnerability scans on a monthly basis.

 
Funds were approved in Decatur’s FY13-14 budget to have a formal PCI gap analysis conducted by a an approved scanning vendor, and we are close to entering an agreement for the service.  This analysis would be performed under new, more comprehensive payment card standards (PCI-DSS 3.0) standards that go into effect tomorrow.

Attorney deadline in 10 days

If you are practicing law in Decatur, your annual occupation tax of $400 and administrative fee of $25 are due no later than Dec. 31.  This tax is for revenue purposes only.

Several lawyers have already taken advantage of our new web service which allows for payments to be made online by credit card with no additional fees. 

If you intend to pay online, go to this site.  For the year, change the selected year to 2013 (lawyers pay for the current year, while all other professionals and businesses pay for the upcoming year).  For the “business name,” enter your actual name as it appears on your bill (first name first, last name second).  Once you’ve found your record, click “renew” to pay.  Please do not select 2014 and do not search by the name of your law firm.

Reminder: property taxes due Friday

Decatur’s second installment tax payment deadline for 2013 is Friday, December 20.

 

If you are not sure whether your bill has been paid or have misplaced your bill, you can check your account online at www.decaturgatax.com or call us at 404-370-4100.

 

The bills were originally mailed out in October.  Penalties and interest will begin accruing on Jan. 8.

 

Georgia community taxed out of existence?

In coastal Georgia, the Geechee residents of Sapelo Island were notified last year and again this year of property assessments that increased by 500 or 600 percent. Residents who were used to paying a few hundred dollars in property taxes now have to pay thousands.

The tax bills may cause the mostly low-income residents of Hog Hammock in Sapelo to sell their homes and eventually dissolve the African-American community that's lived on the island since the 1700s.

The McIntosh County tax assessor's hands are tied.  State law requires assessments to be based on what a willing buyer and seller would agree to in an arm's length sale.  Recent property sales in Sapelo to mainland buyers have led to the skyrocketing assessments. Sales data is an essential component of modern assessment techniques.

Therefore, in my opinion, if Hog Hammock is to be preserved, the most logical route may be through special legislation, such as preferential tax treatment of Hog Hammock as a historic district, or targeted homestead exemptions or freezes that would reduce the tax bills.

However, proposals for a Sapelo Island study committee haven't gone anywhere during previous sessions of the Georgia General Assembly.

Residents are mounting a legal challenge to their assessments which, based on my understanding of Georgia's tax code, will be an uphill climb. 

A more effective approach than hiring a lawyer may be to hire a lobbyist to help them build a broader coalition of support at the state capitol in 2014.

 

Decatur bills 638 insurance companies

Earlier this month, Decatur sent bills for $75 to 638 insurance carriers that write policies in the city.  Insurance companies can mail in their payments or--for the first time--pay by credit card online at www.decaturgatax.com/BusinessLicense.

State law says the license fee is imposed on insurance companies “for the privilege of engaging in the business of insurance” within Georgia’s cities.  The fee varies by city based on population in accordance with a state formula.

At $75 per carrier, Decatur’s insurance company billing for 2014 amounts to $47,850.  The fee payments represent about 10 percent of the city’s total occupational tax revenues, which go toward city operations and services.  During the last fiscal year, the city collected about $43,500 in license fees from insurance companies.

 
Our tax collection rate from insurance companies tends to be lower than other occupational tax types partly because of unpredictability and variation in the insurance market each year.  If an insurance company writes no business in Decatur in a given year, they are not required to pay the fee for that year.

In addition to their payment, insurance companies are required to file a notarized affidavit annually regarding their compliance with immigration laws.  If they renew online, they can just upload their affidavit rather than mailing it in.

Local, independent insurance companies are required to obtain a regular business license from City Hall which may run from $315 to $425 annually.

The city does not regulate insurance practices; Georgia’s insurance commissioner regulates insurance companies and licenses insurance agents.

 

Tax implications of the Braves move

As the Atlanta Braves prepare to move up the road, Cobb County businesses, residents, and visitors will face a handful of new or increased taxes.  Here’s what we know of so far:

·         A 3-mill property tax increase for 175 businesses in the Cumberland Community Improvement District, stretching from parts of Paces Ferry to Powers Ferry.

·         A new 3 percent car rental tax countywide.

·         A new $3 per room per night hotel tax at hotels in the Cumberland area.

·         $368 million in Cobb County Exhibit Hall Authority bonds over 30 years.

·         A reallocation of $8.7 million in property taxes collected countwide—money that would have otherwise been spent on by Cobb County other recreation and greenspace initiatives.

·         45 acres of the new Braves site will be taxable, but 15 acres will be tax-exempt.

Unknowns

·         Future highway access improvements to the stadium and who will pay for them.

·         Will retailers in the Cumberland CID pass their higher property tax costs onto their customers in the form of higher prices?  Forbes’s “Tax Girl” Kelly Erb says, “Of course, savvy consumers realize that corporations don’t simply eat tax and other increases: they pass those increases along to consumers. Higher taxes for businesses will likely result in higher costs for taxpayers, just on a receipt and not on a tax bill.”

·         Will Atlanta itself receive any tax reduction now that the Braves are departing?

Taken in combination with the renewal of Cobb’s SPLOST earlier this month, it seems like Cobb County’s reputation as a low-tax haven in metro-Atlanta may be fading somewhat—a phenomenon which, over time, could help Decatur and DeKalb’s attractiveness in the metro-area by comparison.

 

 

Tax recap from Election Day

Voters in several North Georgia cities and counties cast ballots on a host of tax measures in last Tuesday’s elections.

A 54-46 majority of voters in Cobb County, a traditionally low-tax county, authorized a $68 million bond that could raise Cobb’s property tax millage rate by 2 mills, which would increase taxes there by $200 annually per $100,000 in assessed value.

Also in the metro-area, majorities in Gwinnett County (58-41) and Henry County (54-46) approved renewals of 1 percent special local option sales taxes (SPLOST), and Rockdale County voters passed a 1-cent sales tax for education. 

Elsewhere in North Georgia, majorities in Lumpkin (70-30), Walker (68-32), Carroll, Gilmer, Haralson, Madison, and Union County also approved SPLOSTs.

Anti-tax sentiment was more pronounced in Habersham County, where SPLOST renewal was defeated 54-46, and in Fayette County where a SPLOST for stormwater drainage projects was defeated 57-43.  A SPLOST in Floyd County barely passed.

Voters in the City of Clarkesville in Habersham County passed tax relief for businesses by approving Freeport exemptions on business inventories.

The City of Decatur and DeKalb County had no proposed tax changes on the ballot.

 

City launches online payment option for lawyers

This year, for the first time, lawyers can pay their occupation tax online with a credit card from the convenience of their law office or home.

Each attorney practicing law in Decatur pays a $425 annual occupation tax to the city, which is billed on Oct. 31 and due no later than Dec. 31.

Our new online system allows for payments by Visa, MasterCard, Discover, American Express, and Paypal.  No additional fees are imposed for paying on the web--just the $425 amount. This is a pretty good deal for occupation taxpayers considering that other types of local government taxes often involve surcharges for online payments.

Users are not required to create an account.  There is no registration process, no login or user name, no passwords, and no PINs. 

To use the service, just go to decaturgatax.com and click on "Occupation Tax" on the upper left. Select 2013 as the year, search by "Business Name" and enter your name as it appears on your tax statement to pull up your record.  Once you've accessed your record, you'll see your option to pay.

We still accept cash, check, or charge in person, and checks through the mail.  But we encourage all lawyers to consider using the new online service.

The city also accepts online credit card payments for recreation programs, after-school and summer camp registration, parking tickets, commercial sanitation services, storm water drainage fees, and property taxes.  This latest addition to the city's online payment menu stems from the city's ongoing commitment to support local professionals and businesses through greater automation of services.

Online renewals for regular business license payments will be available later this year.

City mails out 8,000 tax bills

Decatur’s property tax bills for the second installment of 2013 were mailed out a little over a week ago.  If you haven’t received your paper bill yet, please call us at 404-370-4100 to confirm that we have the right mailing address on file, or you can access your bill online.

Please note that we do not send paper tax bills to mortgage companies, so you should forward your bill to your lender if your taxes are paid out of escrow. 

If you have recently sold your property but have received a bill from us, keep in mind that DeKalb County does not instantly notify us of changes in ownership.  Please forward your bill to the new owner so they are aware of the taxes owed before the payment deadline passes on Dec. 20.

Your second installment bill reflects the total year’s billing—including all taxes, fees, and payments made during the first installment (between April and June).  If you have any questions about the calculation, please give us a call or a visit!