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REAL ESTATE TAXES – HOW THEY ARE DETERMINED IN ILLINOIS

REAL ESTATE TAXES – HOW THEY ARE DETERMINED IN ILLINOIS

Ever since real estate values started to drop six or seven years ago, a question that has been asked by many people is, “Now that my property value is lower, why isn’t my real estate tax bill lower?”  The downturn in real estate values has upended the basic assumption built in to the property tax system that assessments will always rise. In Illinois, there are certain components that determine your property tax bill. The real estate has an assessed value that is determined by the county assessor. That amount is then multiplied by the state equalization factor to give the property an equalized assessed value (EAV). The EAV is then multiplied by the local tax rate to get you to the total real estate tax. The total real estate tax can be reduced by certain exemptions (such as the homeowner’s exemption, senior citizen exemption and senior assessment freeze exemption). The calculation is pretty simple, but determining the components and how they can change and how they impact the property tax bill is more complicated.

In Illinois, real estate assessments have been lowered. However, as many have found out, reduced assessments do not mean reduced property tax bills.

Why?

Property taxes are not like income taxes. With income taxes, if a taxpayer earns less money, he or she pays less income tax and the government gets that much less money. However, with property taxes, the government decides how much money it needs (or wants). A property’s assessment then determines what percentage of that amount the taxpayer pays. In other words, the government decides how big of a pie they want (i.e. how much property tax revenue it wants) and then a property’s percentage of that pie is based on how much its assessment is of all assessments . For example, if the pie the government wants is $1,000,000 and a property’s assessment of $40,000 results in paying 1% of the pie, the property tax bill is $10,000.

Then, if the property’s assessment is reduced to $35,000, but the assessments of other properties are reduced even more, the taxpayer could end up paying 1.5% of the pie for a higher tax bill of $15,000, even though the property has a lowered assessed value.

If you have any questions about real estate taxes or buying or selling real estate in Illinois, feel free to contact the Law Offices of Roger W. Stelk at (847) 506-7330.

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