A crash course in ‘Property Tax 101’

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This week’s interview is with Donna Butterfield, a Realtor with Whitehead Realtors. She can be reached at (815) 505-8281. Her e-mail is dbutterfield@whiteheadweb.com.

What are the two dirtiest words in homeownership?

Property taxes. Ahhh, yes, I hear the collective groan from the crowd as I hold my hand up and say, “Wait, my fellow Rockfordians and surrounding Areaians, for I come bearing good news!” And what might that be? Another little word called exemptions.

But before explaining exemptions, can you please tell us, Donna, how are property taxes determined?

Sure. Just sit right back and let me tell you a story.

First, the big bad tax assessor determines the fair market value of a property based on what it has sold for in the past, improvements made (and reported via permits!), and some other method they use, which is unclear to myself and other agents I’ve spoken with.

Next, they take that fair market value, divide it by three, and there you have your assessed value.

Next, they subtract any exemptions you may qualify for to arrive at your taxable value.

They multiply your taxable value by your specific tax rate, tack on any abatements you may be responsible for, and voila! Your tax bill is in the mail!

What exemptions are available, and how do I get them?

Let’s start with the easiest first—Owner Occupied. If you own the home and occupy it, you’re entitled to a $5,000 exemption. BUT—there’s always a but (heck, there’s even a but in my last name)—you can only use it on ONE home in Winnebago County. I strongly recommend that homeowners check their property tax bill to ensure they are receiving that $5,000 exemption. I have seen instances where, somehow, the exemption was removed.

Now, for home improvement exemptions… If you have improved your home (added a sun room, etc.), you could qualify for an exemption. If your improvement increased the fair market value of your home by $10,000, they will allow you a homestead improvement exemption of $2,500 per year for four years.

Are there any special exemptions?

Yes, there are several.

There is an exemption available for a disabled veteran. For information on that, contact the Supervisor of Assessments.

Next, we have our Senior Freeze exemption. The amount of this exemption varies. You must apply for the exemption every year. To qualify, you must apply and receive the Senior Citizen exemption (coming up next), have a total household income of less than $40,000 BEFORE DEDUCTIONS, own and occupy the property on Jan. 1 of the application year and prior base year, and be liable for payment of real estate taxes on a property (duh!). To apply, an application must be completed, signed and notarized, and should be filed for every year by the July 1 deadline. The kind folks at the Supervisor of Assessments will mail applications to taxpayers who already receive a Senior Citizen Exemption renewal form.

Finally, the $3,500 Senior Citizen Homestead Exemption. Ahhh, yes. This is when we reach the ripe old age of 65 and get to stick it to the man! Again, an application must be submitted annually (by Dec. 1). The only requirements to receive THIS exemption are to be 65 years or older in the assessment year for which the application is made; own and occupy the property during the application year; and be liable for payment of real estate taxes on the property. I can’t help but ask the obvious, who would apply for an exemption of property taxes if they didn’t owe property taxes? Things that make you go hmmmm….

Could you show us an example of how this would work?

Yes, I’ll recap them for you. Let’s say your home’s fair market value is $200,000. (And, by the way, don’t let this number freak you out when you see it on your tax bill; as homeowners, we LIKE the number to be lower than what our home is actually worth because it means less tax!). But I digress… OK, your home’s fair market value is $200,000. Divide that by three to get your assessed value ($66,666). From that, subtract any exemptions: ($66,666-$5,000 owner occupied). That leaves someone like me, who’s under 65 and not a vet and hasn’t improved my home, with an assessed value of $61,666.00. That final number is my taxable value. The taxable value is then multiplied by my tax rate, which varies greatly depending where you live. Let’s say the tax rate is 10.4 percent. The annual property tax would be $6,413.33.

So there you have it, “Property Tax 101” is now concluded. I hope it shed a little light on the subject and takes the mystery out of property taxes just a bit!

Thanks, Donna. I am sure many of our readers will appreciate this information and find it very useful.

James Frazier is the owner of A Defined Design-Professional Home Staging Service. He can be reached at 815-997-3212 or through his Web site at www.adefineddesign.com. from the Sept. 5 – Sept. 11, 2007, issuea

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