Property taxes: nobody likes thinking about them.
Unlike other investments, you likely do not know exactly where your money is going when you pay property taxes in Illinois. While they can be frustrating, property taxes are used to fund most services that local governments provide. That includes schools, libraries, and municipal services.
If you are looking for a primer on how property taxes work as a business owner or real estate investor, look no further. If you are a single-family homeowner, we also have a guide on how to handle Illinois property taxes.
Let's go over exactly what property taxes are, how they are calculated, and what you can do about them.
Property Tax Basics
At heart, a property tax is a fee levied upon a property owner by a local government for the purpose of funding that government.
In Illinois, the tax is calculated based on the value of the land. In other locations in the United States and around the world, however, tangible personal property like cars and boats are sometimes included in the calculation.
Calculating Property Taxes in Illinois
In Illinois, there are two factors that come into play when calculating property tax. The first is the Equalized Assessed Value of the property, which is typically assessed at 1/3rd of it's fair market value. This can vary slightly by property, but the 1/3rd assessment is common.
Commercial properties, however, are treated differently. In Chicago and the rest of Cook County, commercial properties are taxed at a 38% market value tax rate. This includes office buildings, shopping centers, and residential rental properties.
The second factor is the budget of the local municipality. The amount of money that the township, city, village, or county requires to run varies per year and per location, so there is no typical rate for this value.
Contesting Commercial Property Assessments
As a real estate investor, you have a legal right to contest the property value assessment of your property. Most property tax exemptions are only for homeowners who use their property as their primary residency. As such, contesting the assessed value of your property is typically the only way to reduce your tax burden.
When contesting an assessment, it is up to the investor to show the assessor that the value of the property is worth less than they say it is.
There are a few ways to do this. You can provide examples of similar local properties with lower values or fill out a contest form at the local assessor's office.
If your property has been vacant for any significant amount of time in a year, you may be able to receive a temporary tax reduction for that year. This reduction is only temporary, though, and you must have documentation to prove the vacancy.
Looking for Property Tax Help?
At GC Realty & Development LLC, we are here to help property owners and real estate investors maximize the profit from their property. With property taxes in Illinois as high as they are, reducing that tax burden is an easy way to improve your bottom line.
Ready to get started? Reach out to our experienced team today to begin maximizing your rental property potential.
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