Cook County is reassessing property valuations which could mean more tax burdens!
These policy changes will affect landlords, especially those owning mixed-use buildings with both residential and commercial units. These changes are part of the county's triennial reassessment process, where the county assessor recalculates property values in three regions: Chicago, the north suburbs, and the south suburbs. By law, properties (excluding farmland) must be viewed, inspected, and revalued once every four years, with Cook County requiring reassessment every three years to ensure accurate valuations.
A property's value is influenced by various factors, including neighborhood improvements, rising home sales prices, and inflation. The assessor determines the property's market value based on what it would sell for today, considering factors like location, proximity to amenities, and the condition of surrounding properties. These elements play a critical role in the assessment process, as market values can vary significantly from one neighborhood to another.
Most routine maintenance will not affect the assessment, but significant improvements can lead to increased valuations. In such cases, property owners can apply for a homestead improvement exemption, which covers the fair cash value added by new improvements up to $75,000 annually, continuing for four years from the completion and occupancy of the improvement.
So let’s proceed to the policy changes in property tax assessments.
Changes in Property Tax Assessments
Previously, mixed-use properties in Cook County were primarily valued based on their residential portions, resulting in lower tax bills compared to purely commercial properties. This valuation method often did not reflect the higher income generated by the commercial units within these properties. In response, Cook County is now taking a closer look at the commercial income of mixed-use properties when determining overall assessments.
Cook County did a crackdown on the so-called "apartment loophole." This loophole allowed predominantly commercial buildings to be classified as residential if they contained even a small, makeshift apartment. Commercial buildings are assessed at a higher rate—25% of their market value—compared to homes and midsize multifamily buildings, which are assessed at 10%. Closing this loophole, according to the Cook County Assessor’s office, ensures that mixed-use commercial buildings pay their fair share of property taxes.
The shift in policy began last year with the reassessment of properties in the southern suburbs of Cook County. This year, the focus has moved to Chicago, with new tax values being set for the city. By 2025, these changes will extend to the northern suburbs. This phased approach aims to ensure a systematic implementation of the new assessment criteria across the county.
There are three main reasons why Cook County made these policy changes:
First - the underfunded pension system.
Property valuations play a crucial role in municipal budgeting for cities like Chicago, New York City, and San Francisco. For over a decade, these cities have relied on tax levies from the expanding commercial real estate sector to fund essential services such as schools and public safety. In Chicago, property taxes are also the largest source of revenue for its severely underfunded pension system, highlighting the importance of accurate and fair property tax assessments.
Second - Cook County's argument that the previous system undervalued mixed-use properties.
Properties with higher commercial rents were not contributing their fair share to the tax burden. By reassessing these properties based on their commercial income, the county aims to create a fairer tax system that equitably distributes tax responsibilities across different property types.
The policy change aims to ensure that midsize mixed-use properties contribute equitably to the tax base. According to Cook County Assessor’s Office spokesperson Christian Belanger, the new split-code assessment system ensures more precise valuations, promoting uniformity across all property assessments in Cook County. The change was recommended in a 2022 report by the Cook County Office of the Independent Inspector General, which highlighted concerns from assessor’s office employees about the misclassification of certain properties.
Lastly - School districts want more.
In addition to policy changes, rising property tax levies from nearly all county school districts have also contributed to the overall increase in tax burdens. The increased levies reflect the higher total taxable amounts requested to cover school district expenses, further driving the need for accurate and equitable property tax assessments.
But many have been impacted negatively by the policy changes on property tax assessments.
Impact of Cook County changed policies on property tax assessments
Over the past few years, both homeowners and building owners have experienced fatigue from continuous property tax increases. According to the Cook County Assessor’s website, the total assessed property value increased by 31% to $47 billion in 2021 from 2018, with most of the increase coming from non-residential properties.
In Cook County, total property taxes rose by 5.4% last year, from $16.7 billion to $17.6 billion. This increase reflects the county's efforts to reassess properties more accurately, particularly targeting mixed-use buildings with substantial commercial components. Properties between 20,000 and 99,000 square feet, with more than 35% of their space dedicated to commercial use, now face "split classifications." This means that buildings previously assessed at the residential rate of 10% are now seeing portions assessed at the commercial rate of 25%.
As these changes take effect in Chicago this year, thousands of properties could be impacted. Data indicates that many owners of mixed-use properties have already appealed their taxes during recent reassessment cycles, suggesting widespread concern and potential financial strain. The new assessments are expected to generate significant increases in property tax bills for many landlords.
But the Cook County Board of Review, which handles appeals on high assessments, has identified several potential over-assessments by the Assessor’s Office. Examples include assessment increases ranging from 100% to 200%. These cases have raised concerns about the accuracy and fairness of the new valuations.
Residents in the southern suburbs, including areas like Tinley Park, are particularly vocal about the negative impacts. Many property owners report that their assessments have doubled or tripled, leading to fears of losing their homes. The substantial hikes have caused significant distress among homeowners, who feel the financial burden is becoming untenable.
The overall tax increase across the county amounted to over $909 million, with homeowners shouldering $599.1 million, or two-thirds of this increase. Commercial properties are responsible for the remaining one-third, contributing an additional $314.4 million. This distribution highlights the significant impact on residential property owners compared to their commercial counterparts.
In the newly reassessed north and northwest suburbs, property taxes increased by $331 million. Residential properties saw a 12.9% increase, amounting to $387 million, while commercial properties experienced a 2.7% decrease, totaling $56 million. This shift indicates a heavier tax burden being placed on homeowners in these areas.
Similarly, in the south and southwest suburbs, taxes rose from $3.88 billion to $4.06 billion, a $173 million increase. Residential taxes went up by $98 million, or 4.1%, while commercial property taxes increased by $75 million, or 5.1%. These changes reflect the broader trend of redistributing the tax burden more equitably between residential and commercial properties.
One striking example of the impact of these changes is Randy Jacklin, a third-generation small business owner. Jacklin's business, Jack’s Inc. in Berwyn, includes a tool rental shop and a 1,700-square-foot apartment. His property, divided into five tax parcels, saw its taxable value increase by an average of 265%. This dramatic rise in valuation translates to a significantly higher tax bill, causing financial uncertainty for Jacklin and similar business owners. The lack of adequate communication and preparation for these changes has led to frustration and calls for a more predictable property tax system from commercial taxpayers.
So now let me show you what you can do if you’re hit with a higher-than-usual tax assessment.
What Property Owners Can Do About Property Tax Assessments
Gather Information
Staying informed is crucial for property owners facing changes in property tax assessments. Begin by regularly reviewing official announcements from the Cook County Assessor's Office. These announcements provide essential details about the new assessment methods, timelines for implementation, and any potential exemptions that may apply to your property. To stay updated, visit the Cook County Assessor's Office website or subscribe to their updates. This proactive approach will help you anticipate changes and prepare accordingly.
Review Your Current Assessment
Before new assessments are issued, obtain a copy of your current property tax assessment. This document will serve as a critical baseline for comparison. By understanding your property's current assessed value, you can better gauge the impact of the new assessment and identify any significant discrepancies. Keep this document readily accessible as you review the new assessment to ensure you have a clear point of reference.
Get a Professional Appraisal
Consider hiring a professional appraiser to conduct an independent assessment of your mixed-use property. A professional appraisal provides an unbiased evaluation of your property's market value, taking into account both residential and commercial components. This independent assessment can be invaluable if you decide to challenge the new property tax assessment. It offers concrete evidence to support your case and can highlight any inaccuracies in the county's valuation.
Review the New Assessment
Once you receive the new property tax assessment, carefully review it for accuracy. Pay close attention to how different sections of your property are classified and valued, particularly the distinction between residential and commercial areas. Look for any discrepancies or errors that could impact your tax liability. If you identify any issues, document them thoroughly to support a potential appeal.
File an Appeal
If you disagree with the new assessment, you have the right to file an appeal. Cook County allows property owners to appeal through the Assessor's Office or the Cook County Board of Review. Familiarize yourself with the deadlines and procedures for filing an appeal, which will be outlined in the official county announcements. Prepare a strong case by gathering evidence such as your current assessment, the professional appraisal, and any additional documentation that supports your property's value.
Seek Professional Help from a Tax Advisor
Navigating property tax assessments can be complex, so consulting with a tax advisor specializing in Cook County property taxes is highly recommended. A tax advisor can guide you through the nuances of the new assessment system, help you understand your appeal options, and offer strategies to minimize your tax burden. Their expertise can be instrumental in ensuring you take the appropriate steps to address any assessment issues.
Consult a Property Tax Attorney
For more complex situations, seeking legal counsel from a property tax attorney experienced in Cook County is advisable. A property tax attorney can provide expert representation throughout the appeal process. They will advocate for a fair assessment of your property and ensure that your rights as a property owner are protected. Their legal expertise can be particularly beneficial in navigating the intricate details of property tax law.
Monitor Changes and Adjust Accordingly
Property tax assessments can fluctuate based on market conditions and policy changes. Regularly monitor your property's assessed value and stay informed about any further adjustments or updates from the county. By remaining vigilant and proactive, you can better manage your property taxes and avoid unexpected financial burdens. Continuously adapting to changes in the assessment process will help you maintain control over your property tax obligations and ensure that you are not unfairly taxed.
Conclusion
The recent changes in Cook County property tax assessments present an opportunity for landlords to take control of their tax situations. By keeping up with official updates, reviewing their current and new assessments thoroughly, and getting professional appraisals, landlords can manage their property taxes more effectively. Seeking advice from tax advisors and property tax attorneys can also help in making informed decisions. These proactive measures not only ensure fair assessments but also help landlords optimize their finances. With a strategic approach, landlords can turn these changes into an advantage, benefiting both themselves and the community.
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