Riley: Prov Property Tax Nightmare Could Spill Over to all Property Valuations

Thursday, December 28, 2017

 

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If you live in the City of Providence and want to prepay your property taxes due in 2018 for the fiscal year 2017 which ends June 30, 2018, you can.

However, you must show up in person in Providence in the next 2 days. I have been asked this question generally about Rhode Island and nationwide it is a hot topic due to the $10,000 tax cap on deducting property taxes. Readers are right to say this probably affects very few households in Providence.

The city had no figures on who it might affect and said there was no noticeable recent increase in prepayment activity.

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I find this surprising. A simple perusal of those currently trying to sell homes in Providence, where property taxes exceed $10,000 annually, numbers approximately 32 homes according to Zillow. The area code most likely to be affected by the new tax law is area code 02906. The average home value estimate is there is $428,000. I used $ 590,000 or higher as the criteria for $10,000 annually in property taxes.

Example

A simple example of the significance of the new tax law is a home for sale on the East Side with 3 beds 5 baths, 6,483 square feet for $1,249,000. That property currently pays approximately $21,800 in Providence property taxes every year. A buyer would need to calculate that he can only deduct $10,000 from his income starting January 1, 2018. Thus, this law significantly reduces the value of that home to any buyer.

Remember, those 32 homes are just the homes for sale, we do not have the data for all the $600,000+ value of households in Providence who will be severely impacted by the new tax law. Rhode Island is a very high property tax State and Providence is a very high property tax city that is on the verge of bankruptcy. Residents and new buyers know that taxes will only go higher and current valuations are clearly going lower possibly triggering a Detroit like meltdown. For many Eastside homeowners, the scramble to leave Providence begins now and its effects will spill over to other neighborhoods in unpredictable ways.

Providence is not alone in having homes instantly devalued overnight by this new tax law. Newport, Watch Hill, and Narragansett may also be vulnerable. Residents in this predicament should immediately call their local tax assessor and their accountant in order to get their last shot at a “prepayment” deduction before 2018.

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Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC. 

 

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Sponsor: GoLocalProv

Sample: N=403

Rhode Island General Election Voters Margin of Error: +/- 4.9% at 95% Confidence Level

Interviewing Period: October 9-11, 2017

Mode: Landline (61%) and Mobile (39%)

Telephone Directed by: John Della Volpe, SocialSphere, Inc.

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