New State Law Increases Cook County Property Tax Homestead Exemptions

September 28, 2017

Illinois Public Act 100-0401, signed into law on August 25, 2017, will increase the value of the Senior Citizens and General Homestead Exemptions in Cook County starting in Tax Year 2017 (payment year 2018). It also increases the income limitation for the Senior Citizens Assessment Freeze Homestead Exemption (“Senior Freeze”) for all counties in Illinois and provides for a minimum exemption in Cook County. This blog post will examine these latest changes to homestead exemptions enacted by the State of Illinois.

What is a Homestead Exemption?

Homestead exemptions reduce the taxable value of a homeowner’s primary residence. There are many different types of exemptions aimed at providing tax relief to different groups, from veterans to people with disabilities. However, in Cook County the General Homestead Exemption, the Senior Freeze and the Senior Citizens Homestead Exemptions are by far the largest in terms of how much taxable value is exempted from taxation. In tax year 2016, for the property tax bills paid in 2017, Cook County taxpayers claimed $7.3 billion in General Homestead Exemptions, $2.0 billion in Senior Freeze Exemptions and nearly $1.4 billion of Senior Citizens Exemptions, which removed 6.6% of the gross total taxable value of property in the County.

By removing some Equalized Assessed Value of property from taxation, exemptions make tax rates higher than they otherwise would be. Due to the zero-sum nature of the property tax in Cook County, a higher exemption for one class of property shifts the tax burden to other classes of property and to homes that do not receive exemptions. The reason exemptions are targeted at homeowners is because the property tax is not based on ability to pay. Unlike business property owners, homeowners cannot pass on their costs to customers, owners or suppliers. Some exemptions are therefore specifically targeted at seniors because some elderly people are on a fixed income and thus are viewed as being less able to adjust to increasing property tax bills. Other provisions of the property tax system in Cook County are also designed to reduce the burden on homeowners, specifically, the County’s use of classification, where homes are assessed at a lower percentage of fair market value than other types of property.

Changes to the General Homestead Exemption

The General Homestead Exemption is available to all homeowners on their primary residence. P.A. 100-0401 increases the amount of equalized assessed value (EAV) exempted by $3,000 to $10,000 for homeowners in Cook County only starting in tax year 2017. The value of the exemption remains at $6,000 for homesteads in all other counties. Homeowners in Cook County will not see a change reflected on their property tax bills until the summer of 2018, when they pay their second installment property tax bills for tax year 2017.

Changes to the Senior Citizens Homestead Exemption

The Senior Citizens Homestead Exemption is available to all homeowners at least 65 years old. P.A. 100-0401 increased the value of the exemption starting in tax year 2017 to $8,000 from $5,000 for Cook County only. The value of the exemption remains at $5,000 for all other counties. A homeowner who qualifies for the Senior Citizens Exemption automatically also qualifies for a General Homestead Exemption. This means that a qualifying homeowner in Cook County who qualifies for the Senior Citizens Exemption could potentially see the total value of their homestead exemptions increase by half or $6,000, from $12,000 in tax year 2016 to $18,000 in tax year 2017.

Changes to the Senior Freeze Exemption

The Senior Freeze is available to homeowners 65 years of age with a household income that does not exceed a certain limitation. The Senior Freeze Exemption works differently from the two previous exemptions, which remove a flat amount of EAV from taxation. Instead the Senior Freeze is equal to the difference between the current EAV and the base year EAV at the time of first application. There is no exemption maximum or property value maximum. It is important to note that the Senior Freeze does not freeze tax bills or tax rates. It is therefore possible for a homeowner’s tax bill to increase even if they receive the Senior Freeze exemption if taxing districts increase their levies.

P.A. 100-0401 increases the income eligibility limitation for all counties. For tax year 2017, the household income limitation in Cook County will increase to $65,000 from $55,000. The limitation will increase to $65,000 for the rest of the state in tax year 2018. The law also implements a minimum exemption of $2,000 for Cook County under the Senior Freeze. This means that even if the EAV of a qualifying senior’s home does not increase from the base, they will still receive at least a $2,000 exemption under the Senior Freeze.