Illinois is renowned for its diverse landscapes and vibrant cities, but it's also known for something else – some of the highest property taxes in the nation. It has a statewide average effective tax rate of 2.07% - nearly double the national average.
For property owners and businesses alike, navigating the intricacies of property tax calculation can be a daunting task. In this article, our experts at Lewis CPA will embark on a journey through the world of property taxes in Illinois. With insights from a Chicago-certified public accountant (CPA) on your side, you too can become an expert in taxation. Whether you own a cozy home or manage a bustling business, understanding how property taxes are calculated is paramount to informed financial planning.
Understanding Property Taxes in Illinois
Property taxes play a crucial role in financing essential public services, such as education, infrastructure, public safety, and local government operations. For property owners in Illinois, it's important to understand the fundamentals of property taxes for effective financial planning and contributing to the community.
The property tax system in Illinois operates on a cyclical basis, involving two key phases: assessment and collection. This process applies to both residential and commercial properties to ensure that the burden of funding essential services is distributed fairly among property owners.
- Assessment Phase: During the assessment phase, local government authorities evaluate the value of real estate properties within their jurisdiction. This evaluation aims to determine the market value of each property, which serves as the basis for calculating property taxes. It's important to note that the assessed value of properties may differ from their actual market value due to factors like property improvements, market conditions, and other relevant considerations.
- Collection Phase: Once the assessments are completed, then begins the property tax collection phase. Property owners are notified of their assessed values and corresponding tax obligations. Tax rates, which are determined by various local taxing districts, are applied to the assessed values to calculate the actual property tax bills. These taxing districts can include municipalities, school districts, counties, and more.
Understanding the assessment and collection process empowers property owners to anticipate their tax obligations, plan their finances, and participate in opportunities to manage their property tax liabilities. For both residential homeowners and business proprietors, a clear grasp of property taxes is an important part of responsible property ownership and community participation.
Understanding the Property Tax Equation
At the heart of property taxation lies a simple yet essential equation that property owners and businesses in Illinois need to understand to navigate their tax responsibilities effectively. This equation consists of three crucial components: equalized assessed value, tax rate, and tax bill. We'll explore how each of these elements interconnects and impacts property owners and businesses alike.
- Assessed Value: The assessed value of a property is the foundation of the property tax calculation. Local government authorities determine this value through an evaluation process and they consider factors like property improvements, market trends, and property type. For most properties in Illinois, the equalized assessed value is set at 33.33% (one-third) of the property's market value. Accurate assessment is important, as it directly influences the amount of tax owed by property owners and businesses.
- Tax Rate: The tax rate is a percentage determined by various local taxing districts, including municipalities, counties, school districts, and more. This rate is applied to the assessed value to calculate the property tax liability. The collective tax rates of these districts contribute to the overall tax burden. Tax rates can vary widely based on location and the services provided by each district. For property owners and businesses, understanding the tax rate is key to estimating their potential tax liability accurately.
- Tax Bill: The property tax bill is the result of the assessed value and tax rate calculations. It represents the actual amount that property owners and businesses are required to pay in property taxes. The tax bill includes contributions to various local services, such as education, public safety, infrastructure, and more.
How Can I Assess the Fairness of My Property Assessment?
After confirming the accuracy of the details in your assessment record, you can use one of two approaches to determine the equity of your assessment.
- Approach 1: Compare your property's fair market value with recent sales of comparable properties in your locality. The fair market value signifies the price you'd accept if an eager and qualified buyer were to make an offer at current market rates. This method is ideal if you've recently bought your property in the open market or obtained an appraisal from a professional.
- Approach 2: Evaluate your property's assessed value in relation to similar properties within your neighborhood to gauge the consistency of assessments. You can get your property's assessed value from the township or multi-township assessor, or the CCAO (also known as the supervisor of assessments). You have the right to review the assessment record for any property parcel, subject to reasonable regulations established by local authorities.
What Can I Do If I think My Assessment Is Unfair?
You have several administrative options for addressing concerns about your property tax assessment. If your property is located within Cook County, you can seek a revision through the county assessor or register a complaint with the Cook County Board of Review. For properties located outside Cook County, you can submit a complaint to the respective county's board of review.
If you find the board's decision unsatisfactory, you can escalate the matter. This involves appealing to the Illinois Property Tax Appeal Board or initiating a tax objection complaint in the circuit court. It's important to note that securing a favorable court ruling is less likely unless you've fully explored the available administrative remedies.
Please bear in mind: If you believe your assessment to be unjust, you'll need to seek administrative remedies as soon as possible. The deadlines for filing are outlined in your "notice of assessment change" form. Once you receive your tax bill, attempting to contest your assessment is generally not feasible.
Property Tax Exemptions and Relief for Businesses
Illinois offers many property tax exemptions tailored to support businesses and stimulate economic growth. These exemptions are a way for businesses to manage their tax burdens while contributing positively to the local community.
Businesses in Illinois may be eligible for exemptions such as the Enterprise Zone Property Tax Abatement, which encourages investment in designated enterprise zones, and the High Impact Business Property Tax Incentive, aimed at attracting and retaining high-impact businesses. Additionally, the Pollution Control Facilities Property Tax Exemption benefits businesses focused on environmentally responsible practices.
These exemptions not only provide direct financial relief but also align with Illinois' commitment to fostering a business-friendly environment. Navigating the landscape of property tax exemptions can help businesses optimize their operations, invest in growth, and contribute to the overall prosperity of the state.
Homestead Exemptions and Residential Property Tax Relief
Homestead exemptions play a pivotal role in providing relief to residential property owners, helping to alleviate the burden of property taxes. In Illinois, a range of exemptions is available to ensure fairness and assist homeowners in managing their tax liabilities.
General Homestead Exemption: Among the exemptions, the General Homestead Exemption stands out as a significant relief mechanism. It extends to homeowners who reside in their primary residence. In Cook County, this exemption translates to a notable $10,000 reduction in assessed value, while in other counties across the state, it offers a $6,000 reduction. This exemption is a substantial deduction from the assessed value and helps to lower property tax payments.
Senior Citizens Homestead Exemption: For those aged 65 and older, the Senior Citizens Homestead Exemption is important. This exemption is exclusively applicable to the primary residence of qualifying homeowners. Offering a reduction of $5,000 in assessed value (or $8,000 in Cook County), this exemption acknowledges the financial considerations faced by seniors and aims to alleviate their property tax obligations.
Illinois' array of exemptions underscores its commitment to supporting homeowners and creating a conducive environment for long-term residence. Residential property owners can explore and apply these exemptions that result in meaningful tax relief and contribute positively to their local communities.
Property Tax Rates Across Illinois Counties: An Overview
Specific tax rates in Illinois are contingent on the collective tax base, which represents the combined value of property within a district. In the second year of the property tax cycle, each taxing authority determines its levy based on the tax base and required revenue. As a result, rates fluctuate annually based on property values and revenue needs, typically subject to voter endorsement.
However, alterations in rates are generally modest due to the Property Tax Extension Limitation Law (PTELL). This law restricts property tax growth driven by escalating property values. Under PTELL, revenues (and hence tax bills) cannot exceed the inflation rate (Consumer Price Index change) or 5%, whichever is lower.
While the law curbs increases, property taxes in Illinois remain notably high. The table below presents average effective property tax rates across various Illinois counties.
Property Tax Rates Across Illinois Counties: An Overview
Cook County, the largest county in Illinois, is home to over 40% of the state's residents. Property tax rates within Cook County are notably higher than the statewide average. The county has an average property tax rate of 2.19%, whereas the state average is 2.07%.
While Cook County's residential property assessment level is lower than the rest of the state (10% compared to 33.33%), the state equalization factor of 2.916 in 2019 largely offsets this difference. This factor multiplies the initially calculated assessed values by 2.916 to determine the values on which taxes are based.
Interestingly, some taxpayers within Chicago pay slightly lower rates than those in surrounding cities. For example, approximately 20% of county property tax revenue goes to the Chicago Board of Education, while around 10.5% supports the city itself, and roughly 5% benefits the county. The annual property taxes for the average homeowner in Chicago range from about $2,400 to just under $6,000, depending on the location within the city.
In DuPage County, a typical homeowner pays $7,221 annually in property taxes, one of the highest amounts in the state. This reflects the county's high home values, as there's a median home price of $315,600 – the highest among all Illinois counties. The county's average effective property tax rate is 2.29%, which is approximately average for the state.
Lake County, located north of Chicago, doesn't offer low property taxes in Illinois. The county has an average effective property tax rate of over 2.95%, ranking among the highest in the state. In terms of absolute amounts, Lake County homeowners pay more in property taxes than residents of any other county in the state. The average homeowner in Lake County pays $8,014 in property taxes annually.
South of DuPage and Cook counties, Will County is home to one of Illinois's largest cities, Joliet. Property taxes in Will County surpass both state and national averages, with an average effective property tax rate of 2.71% – more than double the national average. For a $200,000 home in Will County, the annual property tax payment is around $5,420.
Kane County stands out with some of the highest property taxes in Illinois. The average Kane County homeowner pays $6,777 in annual property taxes. Although this is nearly $2,000 above the state average, it's lower than the neighboring DuPage County's average payment of over $7,221 per year.
McHenry County boasts an above-average effective property tax rate compared to the state's average, sitting at 2.70%. With a median home value of $234,000, the typical homeowner in McHenry County pays $6,329 in property taxes each year.
As one of the largest counties in Illinois, Winnebago County, with a population of just under 300,000, holds the state's third-largest city, Rockford. With an average effective property tax rate of 2.88%, the county has the highest rate in the state.
St. Clair County
St. Clair County imposes real estate taxes to support the county government, cities, and schools. The average homeowner in this county pays $3,296 in property taxes annually.
Situated across the Mississippi River from St. Louis, Missouri, Madison County features lower property taxes compared to many other populous Illinois counties. The average effective property tax rate in Madison County is 2.05%.
Champaign County encompasses the sister cities of Champaign and Urbana, along with the University of Illinois at Champaign-Urbana campus. The typical homeowner in this county pays $3,920 annually in property taxes.
In conclusion, understanding how property taxes are calculated in Illinois is crucial for homeowners and businesses alike. With tax rates determined by assessed values and local factors, navigating the complexities can be challenging. Consulting a Certified Public Accountant (CPA) can offer invaluable insights. At Lewis CPA, our firm has 25+ years of experience in serving both individuals and businesses in Illinois. Let us help you navigate the intricacies of property taxes to ensure you make informed financial decisions for your property. Contact us today!