How Is Property Tax Calculated in Illinois?

Property taxes in Illinois represent a significant funding mechanism for local government services, including public schools, municipalities, and park districts. Understanding the process behind property tax calculation can appear complex due to its multi-faceted nature. This article aims to clarify the various stages involved in determining a property tax bill in Illinois, from initial valuation to the final amount due.

Establishing Property Value: Assessment and Equalization

The initial step in calculating property taxes in Illinois involves determining a property’s value, a task handled by local assessors. These officials, operating at the township or county level, appraise real estate to establish its fair market value. Fair market value represents the price a property would likely sell for in an open and competitive market under normal conditions. Assessors employ various methodologies to arrive at this estimation, including sales comparison, cost, and income approaches.

Once the fair market value is determined, Illinois law mandates that the assessed value of property is set at 33.33% (one-third) of this fair market value. This initial assessed value forms the basis for subsequent tax calculations before further adjustments and exemptions are applied.

Following the local assessment, an equalization process is implemented to ensure a uniform level of assessments across all counties in the state. The Illinois Department of Revenue (IDOR) calculates and issues an equalization factor, often called a multiplier, for each county annually. This multiplier is designed to adjust the aggregate assessed values in a county so that the average assessment level statewide adheres to the statutory requirement of 33.33% of fair cash value. The necessity for equalization arises from potential variations in assessment practices among different local assessment jurisdictions. Without this adjustment, properties of similar market value in different counties might be assessed inconsistently. The equalization factor is applied directly to a property’s assessed value, transforming it into the Equalized Assessed Value (EAV). The EAV then serves as the taxable value of the property before any applicable exemptions are considered.

Reducing Your Taxable Value: Property Tax Exemptions

After the Equalized Assessed Value (EAV) of a property is determined, various property tax exemptions can significantly reduce the amount of EAV subject to taxation. These exemptions aim to provide tax relief to eligible homeowners, effectively lowering their overall tax bill.

One common exemption is the General Homestead Exemption, often called the owner-occupied exemption, which is available for residential property used as the owner’s primary dwelling. This exemption reduces the EAV by a specified amount.

Homeowners aged 65 or older may qualify for the Senior Citizen Homestead Exemption, which provides an EAV reduction and can be claimed in addition to the General Homestead Exemption.

For seniors meeting specific age and income requirements, the Senior Citizen Assessment Freeze Homestead Exemption, or “Senior Freeze,” is available. This exemption freezes the base EAV of a property at a qualifying level, preventing increases in the assessed value due to inflation, although it does not freeze the actual tax bill. Eligibility generally requires the homeowner to be 65 or older, occupy the property as their primary residence, and have a total household income no greater than $65,000.

The Homestead Improvement Exemption allows for an EAV reduction for new improvements for a set period.

Veterans with service-connected disabilities may receive EAV reductions through the Disabled Veterans’ Standard Homestead Exemption. The Returning Veterans’ Homestead Exemption also offers an EAV reduction for two consecutive tax years for those returning from active duty.

Setting the Tax Rate: Local Levies

The property tax rate originates from the collective financial needs of various local taxing bodies that provide public services within a community. These entities, such as school districts and municipalities, determine the amount of revenue they require to operate for the upcoming fiscal year. This required funding is known as their “levy.” Each taxing body submits its individual levy request to the county clerk.

The total levy for a specific area is the sum of all these individual requests from the overlapping taxing bodies that serve that particular geographic location. Property tax rates are not uniform across an entire county; instead, they vary based on the specific combination of taxing districts in which a property is located.

The property tax rate is then calculated using a straightforward formula: the total levy for all overlapping taxing bodies is divided by the total Equalized Assessed Value (EAV) of all taxable property within those taxing bodies’ boundaries. This rate is expressed as a percentage or per $100 of EAV.

A significant factor influencing the tax rate is the Property Tax Extension Limitation Law (PTELL), commonly known as “tax caps.” PTELL limits the annual increase in property tax extensions (the total amount of taxes billed) for non-home rule taxing districts. This law restricts the increase in extensions to the lesser of 5% or the percentage increase in the Consumer Price Index (CPI) for the preceding year. While PTELL does not cap individual tax bills or assessments, it controls the growth of the overall tax levy, which in turn impacts the calculated tax rate, particularly in areas experiencing rapid property value appreciation.

Putting It All Together: Calculating Your Property Tax Bill

The culmination of property valuation, equalization, and exemption application leads to the final determination of an annual property tax bill. This bill is derived by applying the relevant local tax rate to the Equalized Assessed Value (EAV) after all applicable exemptions have been deducted. The fundamental formula guiding this calculation is: (Equalized Assessed Value – Applicable Exemptions) × Local Tax Rate = Annual Property Tax Bill.

To illustrate this calculation, consider a property with a fair market value of $300,000. After assessment and equalization, its Equalized Assessed Value (EAV) might be $105,000. If the homeowner qualifies for $11,000 in exemptions, the net taxable EAV becomes $94,000. Applying a combined tax rate of 8.5% results in an annual property tax bill of $7,990.

Challenging Your Assessment

Homeowners who believe their property’s assessment is inaccurate have avenues to challenge it, beginning at the local level. The initial step involves an informal review directly with the local assessor’s office. This allows taxpayers to discuss their assessment, understand the methodology used, and potentially resolve discrepancies without a formal appeal.

Should an informal review not resolve the concern, the next procedural step is to file a formal appeal with the County Board of Review. This board serves as the primary county-level body for property assessment appeals. To initiate this process, a written complaint must be filed within specific deadlines, 30 days after assessment notices are published or mailed. The Board of Review will then review the evidence presented by the homeowner, including supporting information.

If a homeowner remains dissatisfied with the decision rendered by the County Board of Review, a further appeal can be made to the Illinois Property Tax Appeal Board (PTAB). The PTAB is a quasi-judicial body that provides an unbiased forum for contesting property assessments at a state level. An appeal to the PTAB must be filed within 30 days of the mailing date of the Board of Review’s decision. While an appeal is pending, property taxes must still be paid, with potential refunds issued if the appeal is successful.