Purdue Cooperative Extension Service On Local Government Indiana Property Tax Reform, 2008: Budgets, LOITs and Circuit Breaker Credits. Larry DeBoer Purdue University June 26, 2008. Circuit Breakers. Tax Bill Limits by 2009 Homesteads: 1.5% of Gross Assessed Value
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June 26, 2008
Tax Bill Limits by 2009
Homesteads: 1.5% of Gross Assessed Value
Other Residential, Farm Land: 2.5% of Gross Assessed Value
Other Real and Personal Property: 3.5% of Gross Assessed Value
If your house has an assessed value of $120,000 before deductions, you cannot pay a tax bill of more than $1,800
Tax Bill Limits by 2010
Homesteads: 1% of Gross Assessed Value
Other Residential, Farm Land: 2% of Gross Assessed Value
Other Real and Personal Property: 3% of Gross Assessed Value
If your house has an assessed value of $120,000 before deductions, you cannot pay a tax bill of more than $1,200
Circuit Breaker credits for taxpayers are revenue losses for local governments
2008 $4 million, a small fraction of budgets
2009 $229 million, 2% of budgets
2010 $524 million, 5% of budgets
If tax rate is 2.00, not 3.00, net tax bill before circuit breaker credit is $915. That’s less than the circuit breaker limit, so credit is zero.
Homestead with Gross AV of $120,000, Net AV of $45,750, with no state or local credits.
Suppose School Rate rises to 1.00
With School rate at 0.75
With School rate at 1.00
Each civil taxing unit shall file with the county council its proposed tax rate, tax levy and proposed budget at least fifteen (15) days before budgets are adopted.
Council shall review the proposed rates, levies and budgets, comparing them to each other and to county and Indiana income. Council shall make a nonbinding recommendation about these tax and budget proposals.
Potential role in budget process:
Estimate circuit breaker credits at the proposed tax rates.
Gross Rate x (1 – State Homestead Credit rate) x (1 – the sum of Local Credit rates)
With no credits, the net rate = the gross rate, $3.00 per $100 AV
At what rate will circuit breaker credits drop to zero?
At the 1% limit, for this homeowner, at $2.62 / $100 AV
Net tax reduction for homeowner: $514
LOIT revenue gain for local units: $687
Net revenue gain for local units: $173
For more information