Why your tax bill could go up if homeowner's exemption changes

  • Michelle Mussman

    Michelle Mussman

Updated 5/3/2017 8:53 AM

A proposal billed as a way to provide property tax relief to Illinois homeowners might actually have the opposite effect for many taxpayers.

By a 108-1 vote last month, the Illinois House of Representatives passed the bill, which would increase the homeowner's exemption from $6,000 to $8,000 for most Illinois homeowners. In Cook County, the homeowner's exemption would increase from $7,000 to $8,000.


The exemption saves a homeowner money by reducing the taxable value of a house.

Yet, the end result could be a slight tax increase on many suburban homes.

Here's why: There is nothing in the bill to stop local governments from collecting the same amount of money as before or, more likely, slightly more each year. That levy, spread over a lower tax base, would raise the tax rate and eat up any potential savings for many property owners.

"You're saying less property is taxable, but you're not doing anything to reduce the need of money by taxing districts," said Maurice Scholten, legislative director of the Taxpayers' Federation of Illinois, who wrote an analysis of the bill in April.

Some homeowners would pay slightly more and some slightly less under the bill. Commercial properties and rental homes that don't get the exemption would pay more in taxes. And so would most owners of suburban homes valued at $300,000 or above.

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"Once you increase the tax rate, it's going to hit those with the more expensive house harder," Sholten said.

Anywhere from 80 to 90 percent of most suburban residential properties receive a homeowner's exemption. Many elderly, disabled or military veteran homeowners receive additional property tax exemptions, which would also be increased if the bill is approved.

Using 2015 property tax data, Scholten calculated suburban taxing bodies would lose about 2.9 percent of assessed property value if the proposed exemption increases were applied to that year's property assessments. To maintain the amount of taxes collected, tax rates would similarly increase.

In 2015, the average tax bill for the owner of $200,000 house in the suburbs would have been about $5,618. The average tax bill on a $300,000 house in the suburbs would have been about $8,704, according to an analysis of tax records.

If the exemption increased and tax rates rose by 2.9 percent, the owner of a $200,000 house would end up paying $29 less in property taxes, according to Scholten's analysis.


But the owner of a $300,000 house would pay about $63 more. The average price of a suburban home is roughly $250,000 in suburban Cook County and the five collar counties.

"I can't deny there's going to be a shifting," said state Rep. Michelle Mussman, a Schaumburg Democrat who sponsored the bill. "But let's talk about all the options in front of us as we talk about the ways to help people manage property taxes."

Mussman said the bill is intended to provide tax relief to the "more vulnerable among our population."

Jeanne Ives
Jeanne Ives

Wheaton Republican state Rep. Jeanne Ives was the only vote against the bill.

"Because it was a pandering piece of political gimmickry," she said. "It's a bad bill because it shifts the tax burden to other property owners."

Ives said Democrats want to pass the bill to force Gov. Bruce Rauner to veto a bill that only appears to provide property tax relief.

"That's absolutely what they're trying to do," she said.

But the bill has Republican co-sponsors, including Barrington Hills GOP state Rep. David McSweeney, who said he supported it because the intent is for local governments to reduce property tax collections and not increase the tax rate.

He acknowledged the bill does not mandate a reduction of local tax levies or freeze tax rates.

"The reason I don't think this is a shell game is it sends a signal to local government that the levy should be reduced," he said.

McSweeney is sponsoring a separate bill that would mandate a property tax freeze for schools and a reduction at other levels of local government. It is stuck in committee.

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