For 2012 there has been a change in the law that deals with Homestead Credit. This will affect homeowners and cities in slightly different ways. The outcome is somewhat difficult to predict when it comes to final taxes as the tax system has many variables that contribute to what your final property tax bill is.
So how this worked in the past was a city would make the general levy to set taxes. The county would then tell the state how many homestead properties there are within that jurisdiction. The state would appropriate a dollar amount for each homestead property and the county would reduce the levy by the amount of the state appropriation. The reduced levy was then spread across all taxpaying properties. Your tax statement would show a line account of Homestead Credit which reduced your overall taxes. This was followed with a payment by the state to each city for the amount of the homestead credit as an Aid payment to each city.
This sounds like a good approach to reduce property taxes and worked for a number of years until the state started to have fiscal problems. To balance the state budget they decided they wouldn’t make the Homestead Credit Aid payment to the cities at all making cities deal with the shortfall. After a couple of years the program was funded again for a few years with another fiscal crisis that required the program be eliminated in some cities where the state felt the city had adequate tax base to deal with the lack of Aid. Again the cities had to deal with the shortfall. The program took another hit where only a portion of the Aid payments were being paid to those jurisdictions that still received payments. With the budget arrangements made in this last legislative session the program will see a final reduced payment being made.
For 2012 the program is reinvented. Homeowners will see an exclusion of Market Value of their property. What this means is the Market Value will be reduced according to a formula prescribed under state law. Homesteaded property owners with Market Values under $413,800 will see a minimum of $30,400 reduction plus an additional 9% reduction for market values above $76,000. How this works is if you have a $100,000 home there is a deduction of $30,400 made from Market Value making the value $69,600. The difference then of $24,000 (100,000 – 76,000) is multiplied by 9% for an additional reduction in value of $2,160. The Market Value for this home becomes $67,440. The tax capacity is then calculated based on the reduced market value. The tax capacity at 1% in prior years is $1,000. For 2012 the Tax Capacity will be $674.
So with this change, a slight shift of tax burden occurs to non-homestead, commercial and industrial properties. How this will affects taxes will depend on the number and value of Homestead properties and the extent of other properties within a jurisdiction. We can only wait and see what the outcome will bring.
