In October, Cook County property taxpayers received their 2010 2nd installment tax bills, due November 1. For some homeowners and business owners, those bills caused “sticker shock.” Increased tax bills may not only impact the taxpayers directly, but may indirectly impact the real estate business. Property taxes may change the likelihood of properties selling or transacting. As a real estate professional, there are things you can do to advise your clients on lowering their tax bills and keeping their properties affordable and marketable.

1. How Property Taxes Work

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Property taxes and how they are calculated can be complex for taxpayers and professionals in the real estate field. In Cook County, tax bills are mailed twice a year. The first bill, usually due March 1, is 55 percent of the previous year’s bill and arrives in late January. The second bill, generally mailed in the fall, is far more complicated. It is based on a combination of factors, including an annually calculated tax rate (the cost of government divided by the overall value of property for an area), the taxable value of a home or business (the assessed value determined by the Assessor’s Office), exemptions and the state equalizer.

1. What Bills Look Like

In Cook County, property tax bills are calculated by the Cook County Clerk’s Office. Using the latest available data from the clerk, one can determine a tax bill for a given property in Cook County. For example, the following is this year’s equation for a typical owner-occupied Chicago home:

• Assessor’s Fair Market Value $200,000
• Assessment Percentage x ______0.10
• Assessed Valuation $20,000
• Equalization Factor x ____3.3000
• EAV (before exemption) $66,000
• Homeowner Exemption – $16,000
• EAV (after exemption) $50,000
• General City Tax Rate x_____4.931
• Amount of Tax Bill $2,465

Source: Office of the Cook County Clerk

Last year’s bill for a $200,000 house in the City of Chicago was $2,193, or 12 percent lower. For changes to tax bills in the suburbs, one has to look at changes to respective tax rates.

1. What Happened

In Cook County, the following events impacted the bills of many property owners:

• Taxable values declined, due to reductions from reassessments and appeals, driving up tax rates for many districts.
• For homeowners, the alternative homestead exemption decreased, causing the taxable values to increase.
• Some districts increased their levys, causing rates to increase as value dropped.

So what does the above mean for each property in Cook County? It is virtually impossible, given the number of variables, to give an overall statement to judge whether a bill for a specific property is going up or down. However, more often than not, bills are increasing, which should be reason for real estate professionals to advise their clients to pay close attention to their property taxes.

1. What You Need to Know and Tell Clients

Are there things that can be done to bring down the taxes already billed? Yes and no. Once the bills are out it is difficult to challenge them. However, property owners can take steps to make sure their bills are correct. First, owners need to make sure they have claimed all their exemptions. For example, the Senior Freeze and Long-Time Occupant Homestead exemption require annual renewal. Missed exemptions can be reclaimed for up to three years. Second, all property owners should make sure that their bills match the correct properties both in terms of address and the structures on the property.

Although very little can be done regarding the present bill, property owners need to prepare themselves and be proactive against future tax increases. In Cook County, properties are reassessed every three years. In 2012, properties within the City of Chicago will be reassessed for tax purposes. Owners should pay close attention to when reassessment notices are mailed in their townships. Once reassessments notice arrive, owners should determine whether their properties are overvalued and, if warranted, appeal at the Cook County Assessor. If the owner still thinks the value is too high after receiving an opinion from the Cook County Assessor’s Office, they have the option of appealing to the Cook County Board of Review.

Both venues have limited windows of opportunity within which appeals can be filed and specific rules for filing appeals. Far too often, property owners wait to file and miss important deadlines resulting in the potential for further tax bill increases.

-source, Chicago Association of Realtors-