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Changes to the Homestead Exemption Program

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Ohio Department of Taxation. Property Tax Relief in H.B. 119. Unprecedented expansion of homestead exemption property tax relief targeted to ... – PowerPoint PPT presentation

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Title: Changes to the Homestead Exemption Program


1
Changes to the Homestead Exemption Program
Mike Sobul Ohio Department of Taxation
Presentation to the B.A.D Seminar August 8, 2007
2
Property Tax Relief in H.B. 119
  • Unprecedented expansion of homestead exemption
    property tax relief targeted to elderly and
    disabled
  • No loss to schools or local governments paid
    with state government reimbursements. Not paid
    from existing GRF tax revenues
  • Expanded homestead reduces school district taxes
    on elderly homeowners and may lead them to be
    less resistant to new levies

3
Need for Improved Homestead
  • Property tax is a particularly heavy burden for
    senior citizens on fixed incomes
  • Homestead relief has seriously eroded over past
    quarter-century

4
Property Tax Relief
  • Decline of the Homestead Tax Relief Program
  • of Senior Homeowners Qualifying

2004
1980
5
Property Tax Relief
  • Exempts from tax first 25,000 of homes market
    value for all senior citizens disabled
  • (both real property and manufactured homes)
  • 25,000 market value exemption is 8,750 assessed
    value exemption
  • Average tax cut is 406, or 24.1

6
Property Tax Relief
  • Homeowner qualifies if he or she meets one of
    these criteria
  • Age 65 or over
  • Spouse (at least age 59) of deceased homeowner
    who was receiving homestead at the time of death
  • Totally and permanently disabled

7
Calculation of Credit
  • Market value x .35 x effective tax rate gross
    tax
  • Gross tax x 0.875 net tax before homestead
    (taking into account both 10 and 2 ½ rollbacks)
  • 25,000 x.35 x effective tax rate .875
    homestead credit
  • Net tax before homestead credit tax

8
Grandfather Provision
  • Because current law uses gross tax rates to
    calculate homestead and proposed law uses
    effective tax rate, some property owners will
    receive greater credit under old law
  • If so, they can continue to receive the credit
    established for TY 2006
  • If future credits exceed TY 2006 credit, they
    will receive the larger credit

9
Property Tax Relief
  • Advantages of the new Homestead credit
  • Greatly simplified
  • Greatly expanded
  • Progressive tax relief

10
Homestead Relief Previous Law Complex,
Illogical, Outdated
  • - Complicated income definitions
  • - Uses gross millage although no
  • homeowner actually pays gross millage
  • (creates need for grandfather clause)
  • - Tax relief has fallen far behind inflation

11
Property Tax Relief
  • Number of Senior Citizen Homeowners Receiving
    Property Tax Relief

New Law
Old Law
12
New Homestead Percent Tax Reduction for Various
Home Values
Tax Reduction
Home Value
13
Administering the Change
  • There is an extended filing period from 7/1/07 to
    10/1/07
  • Applies only to new applications for TY 2007
  • i.e., not an extension of time to file late
    applications for TY 2006
  • Manufactured home owners will apply for TY 2008
  • Owners who are already on homestead do not need
    to file a new application during the extended
    filing period

14
Administering the Change
  • Owners who filed their first homestead
    application for TY 2007 prior to June 4, 2007 do
    not need to file a new application during the
    extended period
  • Auditors existing records from prior
    applications already contain the information
    necessary to qualify these applicants for the
    expanded homestead exemption

15
Proposal for Surviving Spouses
  • Surviving spouses that meet all of the following
    requirements do not need to file an application
    during the extended period
  • The home received a homestead exemption for TY
    2006
  • The spouse died in 2006
  • The surviving spouse was at least 59 on the date
    of the decedents death
  • All other surviving spouses should file during
    the extended period to ensure they receive
    homestead for 2007

16
Second Chance
  • Any eligible taxpayers who miss the extended
    filing period will still be able to file a late
    application for TY 2007 between 1/7/08 and
    6/2/08, as provided in permanent law
  • In contrast to the old homestead program, there
    is no need for annual applications under the new
    program

17
Application Forms
  • ODT has drafted a temporary application form for
    the extended filing period
  • The temporary form does not mention late
    application procedures
  • Due dates and questions are specific to the
    extended filing period
  • Revised permanent forms will be reissued in Fall
    2007 for the 2008 filing period

18
Application Forms
  • The temporary forms are available on the ODT
    website
  • ODT has also prepared an FAQ bulletin and a
    informational flier that are also available on
    the ODT website
  • www.tax.ohio.gov

19
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20
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21
Summing Up
  • Property tax particularly heavy burden for senior
    citizens
  • Homestead relief has seriously eroded over past
    quarter-century
  • Proposed Homestead is greatly simplified, greatly
    expanded, and provides progressive tax relief
  • May lead to less resistance to new property tax
    levies
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