How Are Illinois Property Taxes Calculated: A Clear Explanation
Illinois has the second-highest property taxes in the United States, with an average effective tax rate of 2.07%, almost twice the national average. The typical homeowner in Illinois pays $4,800 annually in property taxes, and in some areas, this figure can be upwards of $6,000 per year. Given the high cost of property taxes in Illinois, it is essential to understand how they are calculated to budget accordingly.
Illinois property taxes are calculated using the assessed value of the property, the tax rate, and any exemptions. The assessed value of the property is determined by multiplying the fair market value by the equalization factor, which is set at 33.33% for most properties in Illinois. The tax rate is a percentage determined by local taxing districts, such as school districts, municipalities, and counties. The tax rate is then applied to the assessed value of the property to determine the amount of property tax owed. Finally, any exemptions that the property owner qualifies for are subtracted from the assessed value to arrive at the final property tax bill.
Overview of Illinois Property Tax System
Illinois property taxes are levied on real property such as land, buildings, and other improvements. The property tax system is complex and involves several steps, including assessment, valuation, and taxation. This section provides an overview of the Illinois property tax system, including the property tax cycle and the role of state and local authorities.
Property Tax Cycle
The Illinois property tax cycle generally extends over a two-year period. A tax year is the year of assessment and reflects the value of real property as of January 1 of that year. The actual tax bills are paid in the year following the tax year. For example, taxes on a 2023 assessment are paid in 2024. The property tax cycle involves several steps, including:
Assessment: The local assessor determines the value of the property based on its market value, which is the price a willing buyer would pay a willing seller for the property.
Valuation: The local board of review or the Illinois Property Tax Appeal Board (PTAB) reviews the assessment and determines if it is accurate. If the assessment is inaccurate, the board of review or PTAB may adjust the assessment.
Taxation: The local taxing authorities, such as school districts, municipalities, and counties, levy taxes on the property based on the assessed value. The tax rate is calculated by dividing the total amount of taxes levied by the total assessed value of all properties in the taxing district.
Role of State and Local Authorities
The state of Illinois plays a significant role in the property tax system. The Illinois Department of Revenue (IDOR) oversees the property tax system and provides guidance to local authorities. The IDOR also conducts property tax audits to ensure compliance with state laws and regulations.
Local authorities, such as counties, municipalities, and school districts, also play a critical role in the property tax system. These authorities levy taxes on the property and use the revenue to fund essential services such as education, public safety, and infrastructure.
In conclusion, the Illinois property tax system is complex and involves several steps, including assessment, valuation, and taxation. The state and local authorities play critical roles in the property tax system, ensuring compliance with state laws and regulations and providing essential services to the community.
Assessment of Property Value
Property Assessment Process
The assessment of property value in Illinois is done by local assessors who are responsible for determining the value of each property in their jurisdiction. This process involves a physical inspection of the property, which includes measuring the size of the land, the square footage of the building, and evaluating the overall condition of the property. The assessor also takes into account any improvements made to the property, such as renovations or additions.
Fair Market Value Estimation
The fair market value of a property is the price that a willing buyer would pay to a willing seller in an arm's length transaction. The assessor estimates the fair market value of a property by using one or more of the following methods:
- Sales Comparison Approach: This method involves comparing the property to similar properties that have recently sold in the same area. The assessor adjusts the sale prices of these properties to account for any differences between them and the property being assessed.
- Cost Approach: This method involves estimating the cost of replacing the property with a similar one, taking into account depreciation and other factors.
- Income Approach: This method is used for income-producing properties and involves estimating the income that the property is likely to generate and applying a capitalization rate to that income.
Assessment Levels and Equalization
In Illinois, properties are assessed at one-third of their fair market value. This is known as the assessment level. The assessed value is then multiplied by the local tax rate to determine the property tax owed. The tax rate is determined by the various local taxing districts, such as school districts, municipalities, and counties.
To ensure that assessments are fair and uniform across the state, the Illinois Department of Revenue conducts an equalization process. This process ensures that properties are assessed at the same level of value, regardless of the method used by the local assessor. The equalization process also takes into account any changes in the real estate market that may affect property values.
Calculation of Tax Rates
Tax Levy and Rate Setting
The first step in calculating property taxes in Illinois is determining the tax levy. The tax levy is the amount of money that local taxing authorities, such as school districts, municipalities, and counties, need to collect to fund their operations. Once the tax levy is determined, the tax rate is set by dividing the levy by the total assessed value of all taxable property in the jurisdiction. The tax rate is expressed as a percentage of the assessed value of the property.
Extension Process
Once the tax rate is set, the next step is the extension process. The extension process involves applying the tax rate to the assessed value of each individual property to determine the amount of property tax owed. The county clerk then sends out tax bills to property owners, and the taxes are due in two installments, usually in June and September.
It is important to note that the calculation of property taxes in Illinois is complex and involves many different factors, including the tax levy, assessed value of the property, and tax rate. Property owners should review their tax bills carefully and contact their local taxing authorities if they have any questions or concerns.
Tax Bills and Payments
Understanding Your Tax Bill
Once the Cook County Assessor determines the market value of your property, the Cook County Treasurer uses this value to calculate your property taxes. You will receive your tax bill in the mail, and it will include the assessed value of your property, the tax rate, and the amount you owe in taxes.
It is important to carefully review your tax bill to ensure its accuracy. If you believe there is an error, you can appeal the assessment with the Cook County Board of Review.
Payment Schedules and Methods
Property tax bills in Illinois are typically due on June 1st and September 1st for the prior year (taxes are in arrears). You can pay your property taxes in a variety of ways, including online, by mail, or in person at a local government office.
If you are unable to pay your property taxes in full by the due date, you may be able to set up a lump sum payment mortgage calculator plan with your local government office. However, it is important to note that if you fail to pay your property taxes, you may risk losing your home through a tax sale.
It is recommended that you plan ahead and budget for your property taxes each year to avoid any financial hardship. Additionally, you may be eligible for property tax exemptions or deferrals based on your age, income, or other factors. It is important to check with your local government office to see if you qualify for any of these programs.
In summary, understanding your tax bill and payment options is crucial for Illinois homeowners. By carefully reviewing your tax bill, paying on time, and exploring any available exemptions or deferrals, you can ensure that you are meeting your property tax obligations and avoiding any potential financial hardship.
Exemptions and Relief Programs
Homestead Exemptions
Illinois offers several homestead exemptions that can reduce the taxable value of a property. These exemptions are available to homeowners who use their property as their primary residence. The amount of the exemption varies depending on the county in which the property is located.
The General Homestead Exemption is available to all homeowners who use their property as their primary residence. This exemption reduces the equalized assessed value (EAV) of the property by $10,000. Homeowners who are over 65, disabled, or veterans may qualify for additional exemptions.
The Senior Citizen Homestead Exemption is available to homeowners who are 65 years of age or older. This exemption reduces the EAV of the property by an additional $8,000.
The Senior Citizen Assessment Freeze Homestead Exemption, discussed in more detail below, may also be available to seniors who meet certain income requirements.
Senior Citizen Assessment Freeze
The Senior Citizen Assessment Freeze Homestead Exemption is available to homeowners who are 65 years of age or older and have a total household income of $65,000 or less. This exemption freezes the EAV of the property at the level of the year in which the homeowner first qualifies for the exemption.
To qualify for this exemption, the homeowner must have owned and occupied the property as their primary residence for at least one year prior to applying for the exemption. The homeowner must also apply for the exemption each year and provide proof of income.
It is important to note that while these exemptions and relief programs can provide significant savings on property taxes, they may not apply to all properties or homeowners. Homeowners should consult with their local county assessor's office to determine which exemptions and relief programs they may qualify for.
Appeals and Corrections
Filing an Appeal
If a property owner believes that their property has been incorrectly assessed, they have the right to appeal the assessment. The appeal process involves filing a complaint with the board of review in the county where the property is located. The complaint must be filed within 30 days of the date of the assessment notice. The board of review will then schedule a hearing to review the complaint.
During the hearing, the property owner can present evidence to support their claim that the assessment is incorrect. The board of review will then make a decision based on the evidence presented. If the property owner is not satisfied with the decision of the board of review, they can appeal to the Illinois Property Tax Appeal Board (PTAB). The PTAB is an independent state agency that hears property tax appeals.
Certificate of Error Corrections
If a property owner discovers an error in their property tax bill, they can request a Certificate of Error (COE) from the county treasurer's office. A COE is a legal document that allows the county to correct an error in the assessment or calculation of property taxes. Examples of errors that can be corrected with a COE include incorrect property descriptions, incorrect tax rates, or miscalculations of the tax bill.
To request a COE, the property owner must provide evidence of the error, such as a survey or appraisal report. The county treasurer's office will then review the evidence and issue a COE if the error is confirmed. The COE will then be used to correct the error in the property tax bill.
It is important to note that the deadline for requesting a COE varies by county. Property owners should contact their county treasurer's office for more information on the COE process and deadlines.
Overall, the appeals and corrections process provides property owners with a way to challenge their property tax assessment or correct errors in their property tax bill. Property owners should be aware of their rights and the deadlines for filing an appeal or requesting a COE.
Impact on Homeowners and Renters
Illinois property taxes can have a significant impact on both homeowners and renters. Property taxes are one of the largest expenses that homeowners face, and they can be a major factor in the affordability of a home. Renters may also feel the impact of property taxes, as landlords often pass on the cost of property taxes to their tenants through higher rent.
The amount of property tax that a homeowner or renter pays is determined by the value of the property and the tax rate. In Illinois, the tax rate is determined by various local taxing districts, including cities, counties, school districts, and other special districts. The tax rate is expressed as a percentage of the property's assessed value.
The statewide average effective tax rate in Illinois is 2.07%, which is nearly double the national average. The typical homeowner in Illinois pays $4,800 annually in property taxes. In some areas, this figure can be upwards of $6,000 per year. The high property taxes in Illinois can make it difficult for some homeowners to afford their homes, especially those with low or fixed incomes.
Renters may also feel the impact of property taxes indirectly, as landlords often pass on the cost of property taxes to their tenants through higher rent. This can make it more difficult for renters to find affordable housing in areas with high property taxes.
Overall, the impact of property taxes on homeowners and renters in Illinois is significant. It is important for homeowners and renters to understand how property taxes are calculated and to be aware of the impact that property taxes can have on their finances.
Legislative Changes and Trends
Illinois property tax laws have undergone significant changes in recent years. In 2024, the state passed Public Act 103-0555, which reformed the Illinois Property Tax Sale system by closing loopholes that prevented blighted properties from redevelopment and allowing local governments to intervene to save abandoned properties. This change went into effect on January 1, 2024. [1]
Another significant change to Illinois tax law is HB 3144, also known as the Governor's "grocery tax." This bill would repeal the state's 1% tax on groceries and authorize municipalities and counties to impose their own local 1% grocery tax. The bill is set to take effect on January 1, 2026. [2]
Additionally, HB 4951 would make significant changes to a number of Illinois' tax laws, including allowing lessors to charge sales tax on the lease or rental of tangible personal property. The bill also includes provisions for taxing remote sellers and marketplace facilitators. [2]
It is worth noting that high inflation could lead to property tax hikes in Illinois. A tool developed by the Illinois Policy Institute projects property tax bills through 2026, using the compounded annual growth rate in median property tax rates for Illinois counties, calculated using 1-year and 5-year U.S. Census data. [3]
Overall, these legislative changes and trends demonstrate the ongoing efforts to reform Illinois' property tax system and create a fair and equitable tax environment for homeowners and businesses alike.
References
Frequently Asked Questions
What factors determine the calculation of property taxes in Illinois?
The calculation of property taxes in Illinois is based on two factors: the assessed value of the property and the tax rate. The assessed value is determined by the county assessor's office, while the tax rate is set by the various taxing districts, such as schools, parks, and local government. The assessed value is multiplied by the tax rate to determine the amount of property tax owed.
How is the assessed value of a property determined in Illinois?
The assessed value of a property in Illinois is determined by the county assessor's office. The assessor uses a variety of factors to determine the value of the property, including its location, size, age, condition, and recent sales of comparable properties in the area.
What is the process for calculating property tax credits in Illinois?
Illinois offers several property tax credits, such as the Senior Citizens Assessment Freeze, the Homestead Exemption, and the Disabled Veterans' Standard Homestead Exemption. The eligibility and amount of these credits vary, but generally, they are based on factors such as age, income, disability, and military service. Property owners must apply for these credits through their county assessor's office.
How do property tax rates vary by county or town within Illinois?
Property tax rates in Illinois vary by county and town, depending on the tax levies of the various taxing districts. For example, some areas may have higher school or park district taxes than others. Property owners can look up the tax rates for their specific address or ZIP code on their county treasurer's website or by contacting their county assessor's office.
What methods are used by Cook County to assess property taxes?
Cook County uses a variety of methods to assess property taxes, including computer-assisted mass appraisal (CAMA), which uses statistical models to estimate the value of properties based on factors such as location, size, and condition. The county assessor's office also conducts physical inspections of properties and reviews recent sales of comparable properties in the area.
How can I look up the property tax rate for a specific address or ZIP code in Illinois?
Property owners can look up the property tax rate for a specific address or ZIP code in Illinois on their county treasurer's website or by contacting their county assessor's office. They can also look up their property's assessed value and tax history on their county assessor's website.