A Basic Guide to Illinois Property Tax

As a property owner in Illinois, you pay tax on what you own. Sounds simple, right? Unfortunately, the reality is a little more complex. From assessments to levies, a lot goes into the amount you owe each year.

What Property Is Taxed?

Property tax in Illinois is a form of local tax, meaning that none of the revenue raised is paid to the state or federal government. Instead, the cash collected goes toward the 6,000 cities and municipalities that are able to levy tax on residents.

As with many areas in taxation, there are very specific rules governing what properties can and cannot be taxed. Under the current Property Tax Code, taxation is limited to real property, including land, buildings, structures, and improvements. Prior to 1970, the state did indeed collect personal property tax, but this policy has since been replaced with Personal Property Tax Replacement Income Tax. This tax, enacted to prevent against revenue loss, is imposed on the income of all businesses within the state, including C-corps, S-corps, partnerships, and business trusts.

How Is Property Taxed?

Taxes are assessed by each local jurisdiction on the first day of the first year of the property tax cycle and each assessment is limited to 33.3% of a property’s fair cash value. There is one exception, however: Cook County, containing the city of Chicago, is permitted to assess property based on type classifications.

While local jurisdictions physically assess properties, the County Board of Review evaluates these assessments and determines any relevant exemptions that may apply to properties like schools, churches, and applicable charities. The County Board provides a ruling in these issues, which is then sent to the Illinois Department of Revenue for final approval.  Once received, the Illinois Department of Revenue equalizes all assessments to ensure consistency from one county to the next. This process is designed to ensure both the implementation of proper tax rates as well as the equal distribution of the tax burden.

How Much Is Property Taxed?

After determining the assessed amount, another part of the property tax story comes into play: the amount a local government needs to maintain operations. This amount isn’t consistent, varying from one district to the next based on government funding requirements.

Levying tax does have legal limits, however; districts can’t necessarily demand the entire amount they desire. Additionally, districts are limited by the Property Tax Extension Limitation Law, or PTELL, that restricts increases on property tax to the lesser of the 5% or the increase in Consumer Price Index from the prior year. This rule doesn’t limit tax assessments, however; it only restricts individual tax bills. PTELL doesn’t apply to all districts, but any amounts over this limit need to be approved by voters.

Numerous factors go into determining property tax, and while your bill amount isn’t always clear or logical, paying it is a necessary part of owning real estate in Illinois. If you need assistance with the property tax obligations you are facing, Klein Hall CPAs can provide comprehensive support to ensure you understand your liabilities. Contact us today to get the dedicated guidance you deserve!