By Mark and Jennifer Monge
By Mark and Jennifer Monge
What areas have the highest tax rates? Which ones have the lowest? Fair question, and a common one, so much so that it’s worth revisiting and updating this post which we’ve revisited in the past.
Property taxes are a funny thing, in a dark comedy/tragedy type of way. As you are looking around at different homes you may find, for example, 8 homes that are all on the market for $200,000, but the property taxes vary from a few hundred dollars to many thousand dollars, and this may influence where you decide to buy. But if you do your homework, you may be surprised by what you find out.
Taxes aren’t really fair…I think we would all agree. However I’m referring to how a home is assessed for tax purposes. You may have a $200,000 home on the market that hasn’t sold in the last 20 years that is assessed in the eyes of the tax assessor for $150,000 fair market value, while another $200,000 home on the market may have sold 2 years ago for $225,000, and thus, it assessed for $225,000. So the length of time since the last sale can influence the current property tax valuation, and it can also change it a year or two down the road after you purchase the home.
Another example is this. I have a client that was looking at a house that was $600K. The taxes seemed low compared to the price they were asking. At first glance, most people I think would look at that home and automatically think “Hey…the taxes are low in this area”. So when we were considering this home, I pulled up what the tax assessor had the house assessed it, which was about $300,000, almost exactly half of what the sellers were asking for the house. Does this mean the house was worth $300K? No. Does it mean the sellers were sky high in their estimation of the value of the house? No. It was an older home, that was purchased many years ago, and a much lower value, and over the years the assessor didn’t really keep up with what the true value of the house was. Knowing this, my clients took this into consideration, knowing that if they purchased the house for around the listing price, that the taxes stood a very good chance of almost doubling the following year when the latest sales price was factored into the assessed value in the eyes of the tax assessor.
Let’s look at 8 of the larger markets around Central Illinois. Leave your assumptions at the door, and let’s look at the tax rates. From highest to lowest we have….
8. Peoria Heights…9.3-9.5%
7. Peoria….ranging from 9-9.5%
5. East Peoria…9.0%
4. Germantown Hills…8.8%
2. Dunlap 7.3%
Ok…a few disclaimers.
1) The property taxes within any city can vary a little depending on different factors such as which school district, sanitary district, fire and police protection, park districts, etc. For example, there are parts of north Peoria that are in the city of Peoria, but the Dunlap school district, as well as some being in the Peoria Park District and others being in the Chillicothe Park District. So some of those factors can make a home’s tax rate vary a little, but not much and not dramatically.
2) For the Dunlap rate above-I used the actual town of Dunlap-which is not in the city of Peoria. I know this gets confusing, because about 70% of the homes in the Dunlap school district are actually within the city of Peoria-and some have a Peoria address, while others have a Dunlap address. The mailing address doesn’t by itself have any bearing on what the taxes are.
3) For each community above I used a sampling of 3-5 homes in different parts of each community and looked up what the most recent tax rates were. Some were consistent, some varied, and when there was a variance, I posted the range.
4) Last disclosure-the 8 communities I picked above were picked solely by me, and not picked solely on their tax rates. By that I mean 90% of my clients live in those communities, so I went with those for that reason.
What does this mean for an actual tax bill? Let’s assume a house is bought for $200,000 and is actually assessed at $200,000 in the eyes of the tax assessor. The tax bill, assuming it is an owner occupied home, for each community would be…
8. Peoria Heights…$5,642
7. Peoria…$5,611 (using 9.25% as the average rate)
5. East Peoria…$5,460
4. Germantown Hills…$5,338
2. Town of Dunlap…$4,428
There are other things to take into consideration as well. Some communities might not have all of the same city services as the others, thus the reason for different tax rates. Commute time is something to factor into, as well as amenities like dining and entertainment. That’s something you may factor into your home buying decision when you are thinking about where most of the buyers will be looking when it comes time for you to sell again.
It’s also worth mentioning that the tax rates mentioned above were taken as an average of a few different homes in each community. You may have, for example, one area of Peoria that has one tax rate, but then another area that may have a slightly higher or lower rate because of different tax structures or needs.
The way to figure out what your taxes should be on any particular home is to take the purchase price and then divide that by 3. Then take that number, subtract the $6,000 home owner occupied exemption, and multiply it by the tax rate for that area. You can Google the tax assessors office number for any county and by giving them an address, they will tell you exactly what the tax rate is, as well as what the home is currently assessed for. Sometimes they are right on the money, most times they are off in either direction.
So what should you do? It certainly makes sense to take taxes into account on where you are buying, but look at the whole picture and take into account the other factors such as what you get for the taxes. More importantly, instead of focusing on what the taxes are on the house currently, find out what the tax rate is, make a guess on what you can buy the home for, and then compute what the taxes may adjust to after you buy the house. This way you can make a fair comparison between homes since the current taxes may be way off.