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Changes to the Homestead Exemption Program

This presentation discusses the changes made to Ohio's Homestead Exemption Program, aimed at providing property tax relief to elderly and disabled homeowners. The program has been expanded and simplified, offering progressive tax relief. The presentation also highlights the decline of the previous program and the need for improved homestead relief.

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Changes to the Homestead Exemption Program

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  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 home’s 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 decedent’s 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. 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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