The Civic Federation recently released its annual “Effective Property Tax Rates report,” which looks at the effective property tax rates for Chicago and 28 other selected municipalities in northeastern Illinois. This year’s report estimates the tax year 2016, which means taxes payable in 2017, and found that in all but four towns, the effective rate increased from the previous year.
Why the Effective Tax Rate is Important
The Civic Federation is an independent, non-partisan government research organization that offers analysis and recommendations on government finance issues for Illinois.
The group has a specific formula for measuring the property tax burden for both homeowners and businesses by looking at the median level of assessment, multiplying it by the county equalization factor and the composite tax rate, then multiplying it by 100.
In simpler terms, it calculates the tax rates on the property tax bills into rates that reflect the percentage of full market value that a property owner owed in taxes for a given year.
The effective tax rate fluctuates over time because of the actual composite tax rates shifting, the changing median levels of assessment or both. Cook County’s tax rates are also impacted by changes in the equalization factor. What the effective tax rate does, however, is provide a common denominator for comparing property tax burdens in different cities over time.
In the 10-year period examined by the Civic Federation, the residential effective tax rate increased in Chicago from 1.25 percent to 1.69 percent of full market value.
What Homeowners Can Do
Homeowners can ease the overall property tax burden by taking advantage of tax exemptions that the property qualifies for as well as by appealing the home valuation on the property tax bill.
For example, a home originally valued $100,000, which gets lowered to $80,000 through exemptions or appeals, with an effective tax rate of 4.4 percent, would be taxed at $3,520. This would save the homeowner about $880 on property taxes.
Homeowners should look carefully at their tax record to make sure the following:
- Is the square footage correct and is the lot correct?
- Is the age of the property correct?
- Is the purchase price correct?
- Are there defects in the property not listed?
Even if none of these are incorrect, a homeowner can still file an appeal.
Another avenue for homeowners is to ensure that all property exemptions for which the property qualifies are applied to the tax bill.