Understanding Your Property Tax Bill
Understanding Your Property Tax Bill
As you know, many property owners experienced an increase in their property tax bill this year. In many cases, tax increases were significant. In fact, some may have skyrocketed over 100 percent. However, most were not this extreme as the increase varied depending on where you live and the value of your home. There were also many property owners who experienced little to no change and some taxes even declined. Regardless of where you ended up, it’s important to understand some background information on property taxes and why this year saw such a change from the past.
Understanding Property Taxes and Deductions
Property taxes are used to fund local government (counties, cities, towns, and townships) and the services they provide (schools, fire protection, police, roads, etc.). Taxes are collected twice a year and are used to pay for the services provided during the previous year. Property taxes are based on two main factors. One is the value of your home or your assessed value. Assessed values are market based assessments and are usually somewhat less than the market value.The second factor is the tax rate. This is figured by combining the taxing units (county, city, school, library, etc.) within each taxing district. The tax rate is expressed in dollars per hundred dollar of assessed value. This amount is reduced by a state credit – Property Tax Replacement – and is automatically deducted from your tax bill. The tax rate is then combined with your assessed value to produce your actual property tax amount. To provide some relief, there are several deductions available to Indiana taxpayers. They include the homestead credit, mortgage deduction, over 65, blind/disabled, disabled veterans and geo thermal. Many of these deductions are filed by title companies during closings, but that is not the case in all situations. Property owners should make sure that any deductions they qualify for are filed with the county auditor. Be aware that there are statutory deadlines for filing for these deductions. Once the deduction has been filed, you do not need to refile unless there is a new mortgage or a deed change on the home.
The “Perfect Storm”
So why are so many property taxes going up this year? Many have called it the “perfect storm” because so many factors are impacting the tax at the same time and many for the first time. Some of the factors causing the increase include:
Property Tax Replacement Freeze – In the spring of 2005, the General Assembly “froze” property tax relief in order to help balance the state budget. The state is still providing property tax relief but property owners are picking up the difference.
Elimination of business inventory taxes – Several years ago the state eliminated inventory taxes in order to help businesses and create jobs. Many counties did not fully eliminate the tax until this year. The loss of this tax was then shifted to homes and businesses without inventories.
Trending – Starting with the 2006 payable 2007 assessments, the assessment of property will be adjusted on an annual basis. For the last general reassessment of property in 2002, the assessment was based on 1999 market value-in-use. The 2006 payable 2007 assessments will now be adjusted from those 1999 market values to market values derived from 2004 and 2005 sales disclosure forms.
School funding – The General Assembly changed funding rules to allow schools to increase property taxes.
Juvenile correctional facilities – Counties are responsible for paying for half of the cost of committing juveniles to state correctional facilities.
Growth in local government spending – Counties, cities, towns, library boards, and other local taxing authorities are increasing their tax levies to pay for increases in insurance, bonds (typically to pay for expansion and renovations of facilities), fuel, police and fire pension funds, and other operating costs.
In order to provide some temporary relief from these increases the Indiana General Assembly authorized about $300 million in tax rebates that will go out to property owners after the November bills. It is still too early to know the amount of individual refunds. The issue of rebates will also cause some problems for real estate transactions over the next couple months. The Indiana Association of REALTORS® Legal Affairs Department has provided REALTORS® with guidelines on how to handle these rebates in transactions.
Property Tax Appeals
Indiana law provides a couple of ways for taxpayers to contest the assessed value of their property. Both begin at the local level and can be appealed to the state only after a local review. One way begins with written notification to the township assessor requesting an informal review of the assessment. The request should detail the pertinent facts of why the assessed value is being disputed. It should also include the parcel number, property address, property owner name and contact information. Only a taxpayer can request a review of the current year’s assessed valuation. Following an informal conference with the local assessing official, the township assessor will make a recommendation either denying or approving the appeal. If denied, the township will forward the appeal to the county Property Tax Assessment Board of Appeals (PTABOA) for review. If PTABOA denies the appeal, instructions will be provided on appealing the decision to the Indiana Board of Tax Review. The other appeal process is done with the county auditor and is used to appeal objective issues such as errors in math or exemptions and deductions. The most important thing to remember about property tax appeals is the taxpayer must request a conference with the local assessing official no later than 45 days after receiving notice of a change in assessment or tax bill.