Property is an investment. And when high property taxes make the total cost of property ownership fall compared to value, it starts to be less of a good investment and more of a nuisance.
The Cost of Living in Illinois
The cost of property ownership includes several factors, including:
- Mortgage payments, repair and maintenance costs, insurance and real estate taxes
- Appreciation in the value of the home
- Equity on the house and depreciation
- Deductibility of mortgage interest and property taxes for federal and state income taxes
While the user cost of homeownership nationwide has declined by 19 percent relative to the pre-housing bubble in 2002-2004, in Illinois, the user cost of homeownership hasn’t declined at all. For every $100 in home value in Illinois, homeowners are paying $10.15 in annual costs associated with owning their home, which is more than in 42 other states.
Illinois property tax rates increased 38 percent from the pre-housing bubble to post-recession period. The average of the rest of the country was 8 percent increase.
Some property owners are finding that more than half of their monthly payment for the property are going to pay the property taxes. And those property tax dollars aren’t necessarily going to fund services that as a property owner, you expect.
A large portion of an Illinois property owner’s property tax money is funding pensions, many of which are only 30 to 40 percent fully funded. This is a statewide issue and a local issue, as local pensions are funded at as low of levels as statewide ones.
There are two ways for an Illinois resident to lower the property tax bill: appeal the assessment and ensure that exemption paperwork is filled out for any exemptions for which the property and property owners qualify.
Assessments can only be appealed during specific timeframes when they’re completed for each community. Those dates are available on the Cook County Assessor’s website. The easiest reason to appeal is for incorrect information listed on the property, such as the wrong number of bedrooms or bathrooms, the wrong square footage, etc. To appeal the assessment for other reasons, property owners will need to gather information on nearby and similar properties. Similar properties include those of the same square footage, age and condition.
For commercial properties, there are tax abatement programs, which encourages development in urban areas.