How is the value of property assessed for tax purposes in your state? Which types of property are subject to tax?
The Illinois property tax is a direct, ad valorem tax imposed on real property (35 ILCS 200/9-145, et seq.). Real property taxes are administered, collected, and expended by units of local government. Most local governments levy a general property tax (see, e.g., 65 ILCS 5/8-3-1 (for tax imposed by municipalities) and 55 ILCS 5/5-1024, 5/5-2001 (for tax imposed by counties)), but local governments frequently also impose special purpose taxes on property (often approved by voter referendum).
What is the state property tax rate?
In Illinois, only local governments levy and collect real property tax. The state imposes a personal property replacement tax in lieu of tax on personal property (35 ILCS 5/201(c) and (d)). Some local governments, including the City of Chicago, tax the use of personal property.
What is the range of local property tax rates levied in your state?
The required assessment level for tax purposes on any parcel of real property in any county, except Cook County, is 33.3% of the property’s fair market value, excluding farmland and farm buildings. Cook County classifies property and assesses classes at different percentages of fair market value. The required Cook County assessment level for the residential class is 10% of fair market value for residential property and 25% of fair market value for industrial and commercial property. On occasion, special assessments may also be imposed to finance local improvements.
Exemptions and deductions
What exemptions and deductions are available?
The Illinois Constitution (Article IX, Section 6) provides that the Illinois General Assembly may exempt only the following property types from property tax:
- property owned by the state;
- units of local government and school districts; and
- property used exclusively for agricultural and horticultural societies, and for school religious, cemetery, and charitable purposes.
Not-for-profit hospital claims for property tax exemptions have been a source of dispute regarding the meaning of the Illinois Constitution’s charitable use requirement (see Provena Covenant Medical Center v. Department of Revenue, 236 Ill. 2d 368 (2010)). Following the Provena decision, the Illinois General Assembly amended the Property Tax Code to clarify the requirements for extending charitable property tax relief to non-profit hospitals and related organizations (35 ILCS 200/15-86). In 2017 the Illinois Supreme Court affirmed the constitutionality of this amendment (Carle Foundation v. Cunningham Twp., 2017 IL 120427). The Illinois Supreme Court currently is considering another constitutional challenge to Section 15-86, in which the appellants contend that the exemption afforded to hospitals exceeds the scope of exemptions authorized by the Illinois Constitution (Constance Oswald v. Constance Beard, 122203 (argued 5/22/18)).
The Illinois Constitution also allows homestead exemptions for residential property occupied as a primary residence on January 1 of a tax year. In addition to the general homestead exemption, there are homestead exemptions for senior citizens, low-income, long-term resident individuals, disabled veterans, and persons with disabilities, among others.
What filing requirements and procedures apply?
The property tax cycle extends over a two-year period. A tax year is the year of assessment and reflects the value of real property as of January 1 of that year. The actual tax bills are paid in two instalments in the year following the tax year (e.g., taxes on a 2018 assessment will be paid in 2019). Generally, any partial exemptions or other reductions are reflected in the second instalment invoice.
Real estate transfer tax
How is the transfer of real estate taxed in your state (including tax base, rates, exemptions, and filing formalities)?
Illinois’ real estate transfer tax is imposed on the privilege of transferring:
- title to real estate located in Illinois;
- a beneficial interest in real property located in Illinois; and
- a controlling interest in a real estate entity owning property located in Illinois (35 ILCS 200/31-10 (tax base excludes mortgage amount outstanding at the time of transfer if transferring document references mortgage)).
The tax rate is $0.50 for each $500 of value or fraction of $500 stated in the declaration required by 35 ILCS 200/31-25 (35 ILCS 200/31-10).
35 ILCS 200/31-45 describes various circumstances under which deeds or trust documents are exempt from the tax. Further, 35 ILCS 200/31-46 lists an exemption for a transfer of a controlling interest in a real estate entity in the amount of corporate franchise tax paid by the entity as a result of the transfer.
A transfer declaration must be presented to a recorder when a deed or other transfer document is presented for recordation, or within three business days after the transfer is made, whichever is earlier (35 ILCS 200/31-25). Declaration forms are available on the Department of Revenue’s website. Payment of the tax is evidenced by “stamps” and reported on the department’s payment document (35 ILCS 200/31-15, 200/31-20).
Illinois localities also impose real property transfer taxes (see www.revenue.state.il.us/LocalGovernment/PropertyTax/rett.htm).
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