Breaking News Bar
updated: 1/3/2018 9:09 AM

Who gets the interest from the property taxes you paid early?

hello
Success - Article sent! close
  • DuPage County Treasurer Gwen Henry takes a check from Downers Grove resident Paul Nockels, who paid his property taxes early in hopes of maximizing an income tax deduction that might not be available to taxpayers after this year. Henry's office collected more than $212 million in prepaid property taxes before the end of the year.

      DuPage County Treasurer Gwen Henry takes a check from Downers Grove resident Paul Nockels, who paid his property taxes early in hopes of maximizing an income tax deduction that might not be available to taxpayers after this year. Henry's office collected more than $212 million in prepaid property taxes before the end of the year.
    Joe Lewnard | Staff Photographer

 
 

Lake County homeowners have already paid at least $60 million of the property taxes due this year.

But that money won't be distributed to the local taxing bodies for roughly five months.

In the past, Lake County Treasurer David Stolman kept the interest accrued on prepaid taxes for the county.

But the interest typically has been a few hundred dollars. This year, with the rush to take advantage of property tax deductions before new federal limits go into effect, the interest could add up to hundreds of thousands of dollars.

"What has traditionally happened is the interest is county revenue," said Jim McCullough, Lake County's chief deputy treasurer. "A lot of what we're relying on is history because there's no guidance from the (Illinois) Department of Revenue on prepayment of property taxes."

Some Lake County taxing bodies are hoping to get a cut of the extra interest, however, as in other suburban counties.

"We hadn't thought about it, but we'll take a look at it and see how they're going to handle this," said Libertyville Village Manager Chris Clark. "We want to work with them."

County treasurers said they expected to receive interest rates of 1.2 percent to 1.7 percent when they put the prepaid taxes in escrow accounts. The money can't be distributed until tax bills are finalized, which won't happen until late April or early May, treasurers explained.

All the collar county treasurers, except Lake County's, said the interest from the prepaid property taxes will be split proportionately with the taxing bodies that receive the principal. That means if 3.5 percent of all the prepaid property taxes in DuPage County went to a particular school district, that school district would receive 3.5 percent of the accrued interest.

DuPage County Treasurer Gwen Henry said the county received at least $212 million from prepaid property taxes and her staff is still handling mailed checks. Henry said the interest rate on the county's escrow account is roughly 1.5 percent, which would translate to more than $1.3 million in interest if the $193 million is kept in the account for five months.

"That's about the best you can do on a short-term investment right now," Henry said.

Using that same 1.5 percent interest rate and five-month time frame in Lake County would net about $375,000 in interest on the $60 million in prepayments. In McHenry County, the expected $20 million in prepaid property taxes could generate about $125,000 in interest. Will County officials are still going through mailed checks but are reporting about $26 million in prepaid property taxes so far, which could amount to $162,500 in interest under the same financial conditions.

Kane County Treasurer David Rickert reported late last week his office had received around $40 million in prepayments already, which could produce roughly $250,000 in interest for the underlying taxing bodies.

Cook County allowed homeowners to prepay only the first installment of their 2018 property taxes, which are due March 1. Treasurer Maria Pappas said the $757 million collected will all be distributed later this month and that's not enough time to accrue significant interest.

Rolling Meadows Finance Director Melissa Gallagher said getting the payments a month early will be nice, but it won't create any "huge financial benefit" for the city.

The rush to prepay property taxes was precipitated by a new federal tax law that caps those deductions at $10,000 in future years when itemizing, while the standard deduction was doubled for income tax filings. The IRS has since warned taxpayers against claiming prepaid property taxes on their 2017 income tax forms, but the practice has been allowed for decades.

Article Comments ()
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the X in the upper right corner of the comment box. To find our more, read our FAQ.