Larry DeBoer
Professor of
Agricultural Economics
Purdue University

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What Can Your Property Tax Bill Tell You?

I got my property tax bill this week. I'm excited. Is there anything more fun than reading your tax bill?

Well, yes, thousands of things. Still, there's a lot of information there, about your taxes and about state policy and national economic trends. Your tax bill will sing to you, if you know the tune.

Actually, what I received was not a tax bill. I can tell because it has "Not a Bill" stamped on it. The bill went to the bank that holds my mortgage. I used to go down to the courthouse to get a copy. Now it's mailed to my house. That's progress.

Let's start with the postmark: April 13, 2010. The first tax installment will be due on May 10. In other words, on time. The Department of Local Government Finance (DLGF) says that 85 counties will mail their tax bills on time this year, the highest number since 2002. That was the last year before court-ordered, market value assessment kicked in.

Market value assessment was just the first of the big reforms that caused delays. Along came trending, ratio studies, new deductions and tax caps. Last year, only two counties got their bills out on time; the year before, none did. A lot of hard work went into getting the process back on track. That's progress, too.

Look at the bill itself. My gross assessed value went down this year, by about 4 percent. That means my tax bill is lower than it would have been, which is fine, but I'm concerned that my house is losing value. The recession depressed property values. Even mine.

But wait! Look what I'm doing! I'm using the assessment information on my tax bill as a measure of the potential selling price of my house. That's how a market value assessment system is supposed to work. Prior to 2003, assessments had nothing to do with selling prices (that's why the court threw the system out). If homeowners are treating their tax assessments as appraisals, that's even more progress.

My tax bill increased despite the drop in my assessment. Partly that's because the tax rate went up. Total assessed value in my county fell by 1.7 percent over the past year, also probably because of the recession. With total assessed value down, tax rates have to be higher to raise any particular levy. And total tax levies are up a little, too.

The main reason my tax bill went up, though, is that the homestead credit went down. The credit is a percentage subtracted from my bill. The 2008 reform delivered tax relief with reduced tax rates and higher homeowner deductions. State tax credits were an old way of delivering tax relief, and they're being phased out. They'll all be gone by next year. My county has some local homestead credits, funded with local income taxes, and those will stick around.

The tax bill announces in bold letters that my property taxes are capped at 1 percent of value for homes. It doesn't help me this year. With all those homestead deductions and credits, my tax bill doesn't top 1 percent of my home's value. It won't for most homeowners. If it did, I'd get a credit to bring my tax bill down to the cap level.

This year, a pink page labeled "Important Notice to Homestead Property Owners" accompanied the tax bill. It said that each person or couple is entitled to only one homestead deduction. It also said that homestead deductions are very beneficial, so people may be claiming a homestead deduction on more than one house.

How beneficial? If I decided to rent out my house, I wouldn't get the homestead standard deduction, the supplemental deduction or the homestead credits. The tax bill on my property would more than double. Homesteads get terrific tax breaks that other property doesn't get.

I need to fill out the pink page to continue to claim a homestead deduction on my house. The DLGF will create tools to help county officials eliminate fraud, presumably by comparing homestead claims across counties.

That's just some of what your tax bill will tell you. But perhaps that's enough fun for one day.



Writer: Larry DeBoer
Editor: Olivia Maddox