Banks offer ways to game Trump tax plan for cash-strapped clients
Americans have a new reason to take on debt during the holidays this year: early taxes.
Banks are seeing a wave of inquiries from customers in high-tax states rushing during the final days of the year to prepay 2018 property levies before a cap on deductions for state and local taxes comes into effect. One option: tapping home-equity lines or securities-backed loans to lessen the pain of a lump-sum outlay.
Lenders including Bank of America Corp. and SunTrust Banks Inc. aren't introducing specific products to solve the last-minute problem but are pointing clients to the credit they already have. Counties in several states are scrambling to produce 2018 bills for individuals after officials in New York and New Jersey ordered local governments to accept prepayment of property taxes.
"The discussions we're having now are, 'Call your municipality and try to establish what your liability is. Call your mortgage holder,' " Tim Speiss, vice president of EisnerAmper Wealth Planning LLC, said in a Bloomberg Radio interview.
Bank of America is making the credit lines available mostly to wealth-management customers at its Merrill Lynch or U.S. Trust units, according to a person briefed on the effort. While the firm's consumer bank doesn't offer personal loans, other clients can use products such as undrawn home equity lines of credit, said the person, who asked not to be identified speaking about customer inquiries.
SunTrust is also pointing clients to undrawn personal or home-equity loans, according to a spokesman.
Many individuals pay their property taxes through an escrow account with their mortgage lender, leading banks to get calls on how they can facilitate prepayments. Banks are often pushing customers to speak with tax attorneys before making a change, since the move doesn't make sense for everyone.
PNC Financial Services Group has seen an increase in customers asking to prepay those taxes and is helping clients make payments through escrow accounts where possible, according to a spokeswoman. She didn't clarify whether the bank was extending credit as part of the service.
The Internal Revenue Service said Wednesday that property taxes can be deducted in filings for this year if they were assessed and paid in 2017. The GOP overhaul that President Donald Trump signed last week caps deductions for state and local taxes at $10,000. That's pushed many taxpayers who itemize deductions to try to move 2018 expenses forward into this year.
"The rest of the week is going to be a state of flux, in first knowing that the liability has been posted and then getting it to the right recipient, whether that's an escrow account, the mortgage company or the actual municipality," Speiss said. "All that will be going on."