If you own and live in your home, you may qualify for a homeowner’s exemption, which offers a tax break. The amount of savings varies by location. In Cook County, for example, homeowners might save around $1,000, while outside Cook County, the savings could be closer to $700. Compared to other states like Indiana and Florida, where exemptions can be more significant, Illinois’ exemptions may not seem as impactful. However, they are still beneficial.
It is important to note that Cook County has implemented a nationwide search to ensure homeowners are not claiming exemptions in multiple states. If you are found to be improperly claiming multiple exemptions, penalties can be severe, including retroactive payments, penalties, and interest. Therefore, ensuring you are only claiming the exemption for your primary residence is essential.
Misconceptions About Property Tax Exemptions
One lesser-known fact is that tenants may qualify for a homestead exemption under certain circumstances. If a single-family home is rented and the lease specifies that the tenant is responsible for property taxes, the tenant may be eligible for the exemption. Past administrations in Cook County allowed homeowners’ exemptions to be implemented for townhome properties, but the current administration interprets the statute differently. In some counties, the assessing officials will implement a senior exemption on a rented single-family home where the tenant is responsible for the property tax. In other counties, the exemption would be denied.
Additionally, applying for exemptions is relatively simple, particularly outside Chicago, where township assessors actively assist homeowners. Homeowners can also apply retroactively for up to three years, potentially saving thousands of dollars. Some companies offer to assist homeowners in claiming these refunds for a fee, but this service is unnecessary, as the process can be completed independently by visiting the assessor’s office.
Variability in Exemptions Across Illinois
There are currently about 13 different homeowner exemptions in Illinois. However, their administration varies by township and county, creating inconsistencies. Efforts have been made to standardize these exemptions, but differences persist.
One important exemption is the Home Improvement Exemption, which allows homeowners to make property improvements—such as finishing a basement or adding an addition—without being taxed on the first $75,000 of added value for four years. This exemption is automatically applied when the assessing officials receive the relevant permits. In Cook County, for the four-year period during which the Home Improvement Exemption is in place, homes are assessed according to building characteristics that describe the property before the improvements were made.
Property Tax Exemptions vs. Property Tax Reductions
A property tax exemption reduces the portion of a property’s assessed value subject to taxation. The more exemptions a homeowner qualifies for, the lower their taxable assessment.
On the other hand, a property tax reduction is a more comprehensive approach to lowering a tax bill and typically requires legal assistance. Attorneys argue for reductions based on factors such as market value, uniformity with comparable properties, and property characteristics. In Cook County, successful reductions obtained in the first year of an assessment cycle generally apply for the entire cycle unless annual reassessments become the norm.
Impact of Exemptions and Reductions on Tax Bills
The value of exemptions varies, but in Cook County:
- The general homestead exemption can save homeowners about $1,000 assuming a 10% local tax rate. In Chicago, the tax rate can be closer to 7%. In the south and southwest suburbs, the local tax rate can be much higher. There are local tax rates as high as 30%. This would make the exemption worth $3,000!
- The senior freeze exemption can save an additional $700 to $800 assuming an average tax rate.
- The senior freeze, available to homeowners over 65 with a total household income below $65,000, has a minimum tax dollar value of $2,000.
The senior freeze requires annual renewal, and documentation requirements vary by township. Some assessors require Social Security documents or tax returns, while others simply require a signed form.
Applying for Property Tax Exemptions
In Cook County, homeowners can apply for exemptions online through the assessor’s portal. However, visiting a local township assessor’s office in person is often the most effective way to ensure the exemption is applied correctly. Many homeowners, including legal professionals, encounter issues with online submissions that can be quickly resolved with in-person assistance.
To expedite the process, homeowners should:
- Update their address on their state-issued ID immediately after moving.
- Ensure utility bills reflect the same name and address as the ID.
- Gather any necessary supporting documents, such as closing documents if ownership verification is needed.
Recovering Missed Exemptions
If a homeowner qualifies for an exemption but did not receive it, they can apply retroactively:
- In Cook County, homeowners can go back up to three years.
- Outside of Cook County, the timeframe is limited to one year via a Certificate of Error, which provides a refund for the tax savings they would have received.
Because the process does not include automatic notifications of deficiencies in the form of the applications, homeowners must follow up proactively if the do not receive favorable correspondence within a few months.
Conclusion
Understanding and applying for Illinois property tax exemptions can significantly reduce a homeowner’s tax burden. While the process is designed to be accessible, inconsistencies across townships and counties can create challenges. Visiting a local township assessor’s office is often the best way to ensure exemptions are applied correctly. Homeowners should avoid paying third parties for exemption services, as these exemptions can be obtained independently for no charge.
By taking proactive steps and staying informed, homeowners can maximize their property tax savings and avoid unnecessary penalties.