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Property Tax Contesting

Property taxes are paid in almost every area of the United States. Inevitably, property taxes are also always rising as the price of real estate goes up. In Illinois, property taxes are a little more important to understand because there is an ongoing effort as homeowners and investors we must all make to keep the property taxes at the lowest level we can.  

How Your Tax Bill Is Calculated

In Illinois, two factors go into determining your tax bill. The first is the taxable value of your home; the second is the tax rate. The tax rate is the percentage of the taxable value that the local tax authorities use to calculate your property tax amount. You can learn more about property taxes in Illinois from the Illinois Department of Revenue.

Each Illinois County has a slightly different tax rate calculation. In most Illinois counties the taxable value of a home is 33.3% of the home's Fair Cash Value. The Fair Cash Value is essentially the amount the home would sell for on the open market. In Cook County the fair cash value is 10%.

Property Tax




Underwriting Property Taxes

When you are calculating figures as an investor in advance of buying a property, you must be sure that the current annual tax amount is the same amount you will be expected to pay when you're the property owner. The existing property tax scenario for your seller may be different than yours post-closing as the buyer. 

In Illinois, if a real-estate owner occupies the property, then that owner can request a Homeowners Exemption from the governing body. This can help to reduce the annual property tax obligation. Unfortunately, as an investor you don’t get that exemption because you won’t be living there as your primary residence.

Any property owner over the age of 65 using the property as their primary residence can qualify for a senior exemption. They are also eligible for a “Senior Freeze” if they are over the age of 65 and their income is below a certain threshold. This exemption will freeze the value of the property which the governing body uses to calculate the annual property tax amount. 

Property Tax Sign

In order to account for your potential annual tax amount in the years to come, it’s necessary to take those potential current exemptions into consideration when underwriting a property. If you are buying a property which is occupied by a senior with a freeze, the current taxes could be thousands less per year than what you will eventually pay. Utilize your realtor, property manager, and public records to research the existing and potential tax rate. If you look at other properties in the same area or nearby areas for similar assessed values in the area, you can get an idea of what the highest annual taxes others are paying.

Contesting Property Assessments

Many investors don’t realize they have the legal right to contest their annual property tax amount. The local assessor's office is in charge of deciding  how much your property is worth. This is called an assessment. The amount of property tax you have to pay for your house is based on the assessed value of your property. 

The ability to reduce your annual property tax amount is based on the ability to show the assessor that your property is worth less than the assessor's assessment. As the investor, the burden is on you to prove to the assessor that the value is less than what they think. You may do this by providing appraisals, public records, or realtor comparables for similar recent sales in the immediate area of your property. 

You may also contest the assessor's value by visiting the local township assessor's office or submitting your documents online. There is a fairly simple form and there is no fee, you simply  complete their standard form and provide any documentation you may need to validate your case.

Many investors choose to hire an attorney that specializes in reducing an investors annual property tax obligation instead of doing it themselves. Law offices specializing in this service usually do not charge the investor anything unless they save you money, in which case the fee is generally calculated on a percentage of the amount of money saved.

Contesting By Using Vacancy

Preparing a property by means of rehabilitation can take months. If this is the case, you may have the opportunity to reduce your annual tax obligation by receiving a property tax reduction for one year.

Reviewing Tax Records For Accuracy

Proper documentation is imperative to the assessment of your home. Information compiled by the local assessors office should always be checked for accuracy. 

Check online or visit your local assessor's office to locate the assessor's records.

You may find that the following items on your tax record may be inaccurate:

  • Square footage of home
  • Square footage of lot
  • Recent purchase price
  • Improvements
  • Bedrooms / Baths
  • Lot Sizw
  • Old structures that are now removed, like a garage

Keep in mind that modifying any of these items may result in the addition of value to your property. This can result in a higher than normal tax bill. 

Property taxes are an expense that an investor has the least control over. It’s very important that you are sure of what your estimated annual tax amount will be when underwriting a deal or contesting the property tax.

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