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1. What is property tax?

Property tax is a tax based on the fair cash value of the property owned. For this reason, it is often called an ad valorem tax, meaning that we tax "according to value" of real estate.

2. What is the history of the Illinois property tax?

When Illinois became a state in 1818, the Constitution contained a provision for taxing property in direct proportion to the value of property. From 1818 to 1930, amendments to the Constitution provided the State with various powers and authorities concerning property tax. The Revenue Act of 1872 gave Illinois final authority for setting valuations. The last year the state levied real estate taxes was 1930.

Since then, property taxes have been levied at the local level. The Department of Revenue issues guidelines (e.g., determining equalization factors, approving exemptions, distributing assessment manuals, etc.) and provides technical assistance to local assessing officials.

Property tax is a local tax assessed by the county. Revenues from property tax are collected and spent at the local level.

3. What is considered property?

Property can be divided into two classes - real and personal.

Real property is land and anything permanently attached to the land. Examples are buildings and fixtures permanently or constructively attached to a building. Personal property is all property which is not real property.

Personal property includes automobiles, livestock, money, and furniture.

4. How is the value of property determined?

“Value” is a complicated concept with many definitions. The measurement of market value for tax purposes is the job of assessors, who use one or more of the three basic approaches to measure it:
- Market Data - comparing recent selling prices of similar properties
- Cost - coming up with a value of the cost of reproducing the property minus accrued depreciation plus land value
- Income - calculating the present worth of the income from an income-producing property.

Most real property in Illinois must be assessed based on its value on the open market; this value is the most probable sale price of a property in terms of money in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale and assuming that the transaction is not effected by undue pressures.

5. How are farm properties valued in Illinois?

Farms in Illinois are not assessed according to traditional market value but according to “agricultural economic value,” which is defined by law. This value is based on statewide studies of soil capability and of the net income generated from farmland in Illinois. Each soil type in the state is rated by the University of Illinois - College of Agriculture according to its capability of producing crops. This rating is known as the “soil productivity index.” A State Farmland Technical Advisory Board certifies to the Department of Revenue a five-year average net income for each of these soil ratings. The agricultural economic value for each index is then calculated by dividing the net income by the average of the Federal Land Bank mortgage rate for the same five years. These values are certified to each county by the Department of Revenue by May 1st of the year before they are to be used in assessing. In each county, a Farmland Assessment Review Committee, consisting of local officials and farmers, advises the Chief County Assessing Officer regarding the interpretation and application of the values certified. This committee may propose alternate recommendations to the Department if it disagrees with the values certified. The State Property Tax Appeal Board makes the final decision if there is any disagreement as to the appropriate values and procedures to be used in a county.

To assess an individual farm, an assessor finds the soil productivity index rating for the farm’s crop land and assesses this acreage at one-third of the agricultural economic value certified for these ratings. Permanent pasture is assessed at one-third of the value that would be assigned to it if it were cropland, and “other farmland” (e.g. forest land, grass waterways) at one-sixth of cropland. Wasteland has no assessed value unless it contributes to the productivity of the farm.

Farm buildings are assessed at one-third of the value they contribute to the productivity of the farm. Farm home site and dwelling assessments are based on market value.

6. Who must pay property taxes?

All owners of real property must pay property tax unless specifically exempted by State law. Leaseholders must pay property tax if they are leasing real estate from an owner whose property is exempt from property tax. Owners of business, industrial, agricultural, and residential property all pay property tax. Renters also contribute to the property tax but do so indirectly through their rent. Landlords consider taxes as cost of doing business and adjust their own rents to cover them. In Illinois, taxpayers now pay property taxes only on their real property. Personal property tax for individuals was eliminated in 1969.

7. Who spends property taxes?

In Lake County, we have over 200 individual entities of local government that levy property taxes. Property taxes are raised, spent, and distributed locally. They finance a major part of the services provided by local government units, which benefit Lake County citizens and their property. The largest share of taxes goes to school districts, generally 65% of each tax bill.

8. How important is the property tax compared to other taxes?

The property tax is the major source of tax revenue for local governments in Illinois, as it produces more than three-fourths of their total tax revenue. Some types of governmental units, such as cities, are less dependent on the property tax than other units, such as school districts, which have no other taxing powers.

The Property Tax Cycle - from the assessment of property to the collection and distribution of taxes - takes nearly two years for most property. It can be divided into six steps:
(1) Assessment
(2) Review of Assessments
(3) Equalization
(4) Levy
(5) Extension
(6) Collection and distribution of property tax revenue