Property Tax Calculation
Your property taxes are determined by multiplying the tax rate (a function of assessments and spending by local government) by the equalized assessed or taxable value of your property. This section reviews: Assessed Value Equalized Assessed Value Assessment Review Tax Extension Budgets Budget Hearings Levies Determination of Tax Rates Calculation of Tax Bill Scenarios on Tax Calculation
Assessed Value Assessed value is the value placed upon property by the local assessor after multiplying its market value by the statutory level of assessment, which in Illinois is 33.33%. Market Value is the most probable sale price of a property, in terms of money in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and assuming that the transaction is not affected by undue pressure. Assessment officials analyze sales that occurred during the three-year period preceding the January 1st assessment date in order to estimate the market value of property in the township. Example of an Equalized Value Calculation The assessor determines the market value of Mr. Tax’s home is $250,000. The assessed value is calculated by multiplying the statutory level of assessment (.3333) by his market value. Mr. Tax’s equalized value is $83,325. Market Value
(Market value)
Statutory Assessment Level X X
(One-Third or 33.33 Percent of market value)
Equalized Value
=
=
(Value after multiplying market value by the level of assessment)
$250,000
.3333
$83,325
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Equalized Assessed Value
Equalized Assessed Value (EAV) of property is the assessed value multiplied by any applicable equalization factor or multipliers. The Chief County Assessment Officer (CCAO), Board of Review and/or the Illinois Department of Revenue (DOR) can apply equalization factors on Lake County property. Equalization is the application of uniform percentage increase or decrease to assessed values of various areas or classes of property in order to bring assessment levels, on average, to the same percentage of market value mandated by law. Assessors may equalize value between the township’s assessment neighborhoods, the CCAO equalizes among the county’s 18 townships and the DOR equalizes assessments among the state’s 102 counties. Example of an Equalized Value Calculation The CCAO conducts an assessment to sales ratio study and determines township values are 3.5% too low. The equalized value of Mr. Tax’s home is calculated to be $86,241 as follows: Assessed Value $83,325 X X Equalization Factor 1.035 = = Equalized Value $86,241
Assessment Review Taxpayers in Lake County, who believe that their assessment is unjust, may appeal with the Lake County Board of Review. If dissatisfied with the Board’s decision, can appeal with the State Property Tax Appeal Board. An Appeal can be based on any or all of the following contentions: Uniformity with similar properties in the neighborhood. Market value of the property as of January 1 of the tax year. Contention of law.
Tax Extension Once the assessment cycle is complete, the County Clerk receives the assessment books from the Board of Review and applies the state equalization factor from the Department of Revenue to the individual assessments. Extension is a two-step process that includes the computation of tax rates and the application of those rates to the EAV’s of the individual parcels of real estates.
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Budget Taxing entities throughout the county, including school boards, municipalities, park districts, townships, special districts etc, determine a budget for their agency. The budget expresses in dollars and cents a plan of operation for a specific time. It essentially allocates resources for future goals and projects expected by residents. Taxing districts project expenditures based in the revenues that are expected from all sources of non- tax revenue. The difference between non-tax revenue and the total amount needed to operate is usually the amount the taxing district will ask to be raised from the property tax.
Budget Hearings The taxing entities throughout the county are required to hold public hearings on the budget. This process provides taxpayers with an opportunity to express their feelings about the service they receive from units of local governmental and the cost of that service.
Levies The amount of money raised from property taxes to fund the budget is called the “levy”. When a taxing district levies, it must show a separate amount for each fund for which it is levying. Every taxing district must file its levy with the County Clerk by the last Tuesday in December. The amount levied is the amount that taxpayers will pay on their property tax bill in the following year. Again, each taxing body must hold a public hearing on the levy before their board may pass the levy ordinance.
Determination of Tax Rates Where you live within the county determines the taxing entities to which you will pay your taxes. Chart of Determination of Tax Rates Levy
(Amount of money needed for taxing district)
÷
District’s EAV
= Total
X
100
(Expressed in dollars per 100)
=
Tax Rate
$
÷
=
$
X
=
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Example: Mr. Tax’s home is provided services by 18 taxing entities. Taxing Body County Of Lake County Of Lake Pension Road and Bridge Road and Bridge Pension Fire Protection Public Library Public Library Pension Elementary School District Elementary School District Pension College High School High School Pension Special Road Improvement Sanitary District Forest Preserve Forest Preserve Pension Township Township Pension Total 2006 Tax Rate 0.47700 0.03900 0.14600 0.01400 0.34000 0.17200 0.00700 2.50500 0.03000 0.21100 2.18100 0.04000 0.16700 0.21600 0.21300 0.00800 0.18400 0.00200 6.95200 2007 Tax Rate 0.47759 0.04341 0.14700 0.02000 0.34400 0.17200 0.01200 2.65000 0.03000 0.23500 2.20500 0.05600 0.16700 0.21400 0.22409 0.00691 0.18300 0.00400 7.19100
Calculation of Tax Bills Mr. Tax's tax bill is calculated as follows: 2006 Tax Year – EAV is $86,241 less $5,000 for the General Homestead Exemption equals $81,241 times the Tax Rate 6.95200, divided by 100 (tax rates are expressed in dollars per $100 of EAV, equals a Property Tax Bill of $5,647.87. EAV
(Equalized Assessed Value)
- Exemptions =
(Homestead, Senior Freeze, Etc)
Total
X
Tax Rate
(Expressed as a decimal)
=
Property Taxes
$86,241 -
$5,000
= $81,241 X 0.0695200 =
$5,647.87
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2007 Tax Year – Using the 2007 tax rate and the EAV from the prior example of $86,241 with a General Homestead Exemption of $5,000 equals $81,241 times the Tax Rate 7.1900, divided by 100 (tax rates are expressed in dollars per $100 of EAV) equals a Property Tax Bill of $5,842.04. EAV
(Equalized Assessed Value)
- Exemptions =
(Homestead, Senior Freeze, Etc)
Total
X Tax Rate
(Expressed as a decimal)
=
Property Taxes
$86,241 -
$5,000
= $81,241 X .071900
=
$5,841.23
If the Equalized Assessed Value, Exemptions or Tax Rate changes you can see how this would affect your tax bill.
Scenarios on Tax Calculation The following scenarios provide examples to further explain the property tax calculation process.
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Scenario 1 - Base
A jurisdiction has two identical homes, each valued at $5,000. A single taxing body needs $500 from property tax to operate next year. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 500.00
÷
10,000
= Tax Bill
$0.05
X
$5.00
Assessment
X
Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal)
$ 5,000.00
X
.050
=
$250.00
Results 2 Parcels X $250.00 = 2 X $250.00 = $500.00 Total Needed
Result: The amount needed is achieved for the levy.
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Scenario 2 – Taxing bodies UP; Assessments SAME; Taxes UP
The taxing authority increases the levy (spending) by 10%, but the assessments remain the same. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 550.00
÷
10,000
=
$0.055
X
$5.50
Tax Bill Assessment X Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal)
$ 5,000.00
X
.055 Results $275.00 $275.00
=
$275.00
2 Parcels 2
X X
= =
Total Needed $550.00
Result: A 10% spending increase raised tax bills proportionately, by 10%.
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Scenario 3 – Tax Levy UP; Assessments UP; Taxes UP
The taxing authority increases the levy (spending) by 10%, and the assessments increased by 10%. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 550.00
÷
11,000
= Tax Bill
$0.05
X
$5.00
Assessment
X
Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal per $100)
$ 5,500.00
X
.050 Results
=
$275.00
2 Parcels 2
X X
$275.00 $275.00
= =
Total Needed $550.00
Result: When spending increases at the same rate as assessments, tax rates will
remain the same (increasing the numerator and denominator of a fraction causes the result to remain the same). This makes it appear as though the assessment increase caused taxes to increase.
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Scenario 4 – Tax Levy SAME; Assessments UP; Taxes SAME
The levy remains the same, assessments increases by 10%. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 500.00
÷
11,000
= $0.04545 Tax Bill
X
$4.55
Assessment
X
Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal)
$ 5,500.00
X
$.0455
=
$250.00
Results 2 Parcels 2 X X $250.00 $250.00 = = Total Needed $500.00
Result: Taxes remain $250 as in the first scenario because an increase in the
assessment, with no change in spending, results in a commensurate drop in the rate, leaving tax bills unchanged.
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Scenario 5 – Tax Levy UP 3.5%; Assessments UP 10%; Taxes UP 3.5%
The levy increases at inflation rate, say 3.5%, and the assessment increases by 10%. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 517.50
÷
11,000
= $0.047045 Tax Bill
X
$4.7045
Assessment
X
Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal)
$ 5,500.00
X
.047045 Results
=
$258.75
2 Parcels 2
X X
$258.75 $258.75
= =
Total Needed $517.50
Result: Taxes increased by 3.5% or the rate of inflation. This is the same as the levy increase. The only reason taxes increased in Scenario 5 and didn’t in Scenario 4 was the increase spending by the taxing authority.
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Scenario 6 – Tax Levy UP 3.5%; Assessments DOWN; Taxes UP 3.5%
The levy increases at inflation rate of 3.5%, and the assessment decreases by 10%. Calculation of the tax is as follows:
Tax Rate Levy
(Amount of money needed for taxing district)
÷ Districts EAV =
Total
X
100
(Expressed in dollars Per 100)
$ 517.50
÷
9,000
=
$0.0575
X
$5.75
Tax Bill Assessment X Tax Rate = Tax Bill Per Parcel
(Expressed as a decimal)
$ 4,500.00
X
0.0575 Results
=
$258.75
2 Parcels 2
X X
$258.75 $258.75
= =
Total Needed $517.50
Result: Taxes increased again by 3.5% or the rate if inflation. Even though the assessment decreased by 10%, taxes increased because the taxing authority needed to increase spending by 3.5%. Regardless what the assessment does in terms of decreasing, increasing or remaining the same, if the taxing authority asks for more money, taxes will always go up. Note: All of the above scenarios had the assessments changing by the same percentage. When assessor’s increase or decrease assessments by differing amounts throughout the township, this has the affect of redistributing the tax burden causing individual tax bills to change by differing amounts.
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