Understanding property taxes

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Commentary by Mike Shafer

In looking at how the tax caps work in conjunction with the rate to determine a taxpayer’s property tax bill, there is a prescribed order of steps the county treasurer is required by law to follow. For example, if we start with a typical home assessed at $300,000, first the standard deduction of $45,000 would be subtracted from the $300,000. Then a supplemental deduction of 35 percent of the remaining value would be deducted. If the homeowner has a mortgage on the property, as is very commonly the case, an additional deduction of $3,000 would be taken off to arrive at a taxable value of $162,750. This taxable value is divided by 100 (because the tax rate is expressed in terms of dollars per hundred dollars of valuation), which equals 1,627.5 and this figure is then ready to be multiplied by the tax rates.

At this point, the tax rate used to multiply by the taxable value is the portion of the tax rate that is subject to the circuit breaker tax cap, or in other words the referendum rate of $0.2375 is broken out from the rest of the rates that make up the $2.5584. Together these other rates add up to $2.3209. The $2.3209 times the 1,627.5 equals $3,777.27. However, since this amount would be greater than 1 percent of the gross assessed value of the home (the $300,000 we started with), the circuit breaker kicks in here and limits the tax bill to 1 percent of the assessed value, or $3,000.00.

The referendum rate is outside the 1 percent cap, so that rate is next multiplied by the 1,672.5 to yield a tax liability of $386.53. This amount is added to the $3,000 from the part of the bill we figured under the cap, leaving us with a total property tax bill for this example house of $3,386.53.

To calculate your property tax bill, the DLGF has a good calculator at https://gateway.ifionline.org/CalculatorsDLGF/TaxCalculator.aspx.


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