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How Property Taxes in Chicago Compare to Rest of Country

Property taxes in Chicago can be a bit confusing and overwhelming. So, we’ve compiled the most important details about what you need to know.

First, we’ll walk through some of the basics, like how they’re calculated and where your money is going, as well as more advanced information like exemptions and tax appeal deadlines.

If you’re looking to buy a home in the Chicago area, it’s important to know how property taxes compare across neighborhoods.

For example, the median single-family home price in Chicago is $263,000. That means that if you bought a house for that amount and paid 2.32% of your purchase price as property taxes, your annual tax bill would be $6,973.

Are property taxes high in Chicago?

According to data, the amount of property taxes that Chicagoans pay is consistent with the rest of the country. In addition, they are lower than what some other Illinois cities charge.

For example, the property tax rate in Chicago is higher than Naperville’s tax rate by just 0.1 percent and Elgin’s tax rate by 0.2 percent.

Property taxes as a percentage of home value is relatively similar across the U.S. at 1.3 percent, but Chicagoans pay slightly less than the national average (1.22 percent). The chart below shows how Chicago’s tax rate compares to other major cities across the country.

The median property tax in Chicago is $2,867 per year, meaning that half of all homeowners in Chicago pay less than this amount and half-pay more. That breaks down to $1,433 per month.

Chicago’s median property tax rate is 92nd out of 100 major cities in the U.S., placing it just below the national average (94th).

Are property taxes higher in Chicago or suburbs?

Property tax rates in the city of Chicago are higher than in suburban areas, including Barrington ($1.84), Palatine ($3.88), and Arlington Heights ($5.38). However, property taxes in Chicago itself are significantly lower than many other municipalities across the region.

In addition to being well below the median city tax rate, Chicago’s city rate is also well below the state average of $5.05. Every state except Hawaii has a higher median property tax rate than Chicago. Our rates are lower than most states nationwide, averaging about two-thirds the national median ($2.19).

Property taxes in Chicago have been going up in recent years, with property taxes in Illinois increasing at one of the higher rates in the nation.

Where Your Property Tax Goes

Property tax money is used to pay for local services and projects and to cover the debt that the city has issued. Some of your property tax dollars go toward federal funding as well, such as Medicare and Social Security.

However, only 13 percent of revenue from property taxes goes to the city, 15 percent goes to schools, and 20 percent to the county. The remainder is used for other local programs and projects and paying off debt.

Who Wants Your Property Tax Dollars?

Residents are not the only ones who want your property tax dollars. Both the federal government and Chicago Public Schools also have their eyes on your money.

Unfortunately, while beneficiaries often depend on your contributions to pay for vital public services, they can also make it more difficult for you to raise an appeal against increased tax rates.

How to Get the Lowest Property Tax Bills

Proper planning can help you save thousands of dollars in property taxes. Here are some tips that are sure to help:

  • If you are already a homeowner, review your property tax bill to determine if you can refinance your mortgage and have it taken out of the new monthly payment. Your lender should be able to do this.
  • Should you be looking at purchasing a home in Chicago, budget for property taxes before taking out a loan on your new house, which is especially important for first-time homebuyers who do not have the cash to pay their property taxes.
  • Record your conversations with your lender or agent, even if things are going well during negotiations, because you never know when they might change their tone about putting property taxes in the monthly loan payment.
  • Study up on all the possible exemptions that you may be able to apply for to save money.

Work with a realtor who will be able to show you homes in neighborhoods within your price range, so you won’t have to overspend on your primary residence just because your taxes are higher than expected.

How Property Tax Rates Are Calculated

For the median household income, property taxes are calculated according to their ability to pay for them. For example, in Chicago, where the median household income is just under $47,000 annually, property taxes are 2 percent of that amount (before deductions).

If you’re wondering how your city ranks in comparison to other major cities in terms of taxing its residents, here’s an example:

  • San Francisco property owners pay almost twice as much in property taxes as Chicagoans.
  • New York City property owners pay three times as much in property taxes.
  • Houston property owners pay more than twice as much in property taxes.

While the city’s budget determines property tax rates, your property value also has a say in how much you’ll pay. Therefore, a higher valuation will garner you more taxes to pay each year, saving you money overall.

Your home’s value is based on its market value, based on the sales price of similar properties within your neighborhood.

The median property tax paid each year on city and county property is around $2,100. In Chicago, the median property tax paid each year on city and county property is just under $3,000.

Illinois property tax rates are among the highest median property taxes paid by any residents throughout the United States, based on the median home value.

Cook County’s Property Taxes

Cook County has the second-highest property taxes in Illinois, with about 2.32 percent. According to recently released data, here are some county-by-county changes in effective rates for Cook County (for single-family homes; condominiums were not included):

  • About 1.45 percent decrease since last year
  • The effective tax rate was 1.83 percent
  • The effective tax rate is now 2.52 percent
  • About 8.13 percent decrease since last year
  • About a 1.61 percent increase since last year, making the effective tax rate for this area about 2.19 percent
  • A homeowner living in Beverly with a market value of $442,000 and an assessed value of $348,000 will have a property tax bill of about $5,711.

Compared to Illinois property taxes, Cook County’s property taxes are still more expensive, but the significant decrease of more than 1 percent in effective tax rates is certainly a plus.

Cook County and Chicago Sales Tax

In addition to generating property tax revenue, both the city and county continue to raise the local sales tax on its residents, tourists, and visitors. Based on the consumer price index, Chicago increased its city sales tax by 0.75 percentage points.

This change raised the city’s overall sales tax rate to 10.25 percent—the highest in the country for a major city (Chicago is the only one of the five largest cities in America also located in Cook County).

Residents living outside of Cook County purchase products and services, such as a wedding reception in a banquet hall in the county and are required to pay the increased sales tax.

Chicago raised its overall sales tax from 9 percent to nearly 10 percent, higher than most other major cities when it increased its sales taxes. For example:

  • Houston’s sales tax is currently 8.25 percent
  • Philadelphia’s sales tax is currently 8 percent
  • Phoenix’s sales tax is 9.6 percent
  • San Antonio’s sales tax is currently 8.25 percent
  • Dallas’ sales tax is 8.25 percent

Los Angeles’ sales tax rate is 10.25 percent, making it the highest property tax rate in the country for a major city, beating out Chicago by 0.25 points. Philadelphia, Houston, San Antonio, Dallas, Phoenix, and LA have sales tax rates under Chicago’s current 10.25 percent rate.

The city of Chicago also raised its amusement tax from 1 percent to 6 percent, hoping that it will generate another $12 million in revenue per year to make up for the city’s $33 million budget deficit.

The amusement tax was originally implemented in 1939 to help pay for Chicago Public Schools’ expenses. However, the Department of Cultural Affairs and Special Events (DCASE) reports none of this tax has been spent on schools since 2007.

Other High Property Taxes by Counties: Average Property Tax Rate in Illinois

While some counties boast lower property taxes, numerous counties statewide with a higher median income generate more property taxes, based on the state equalization factor.

Many of these areas are within the boundaries of taxing districts for water reclamation, school districts, and lower median households.

Cook County is not the only county that has high property taxes. Here are some of the top counties with high property taxes based on state figures from 2012:

  • Lake County – This county’s effective property tax rate was 2.49 percent, making it the fourth highest in Illinois
  • Kane County – This county’s effective property tax rate was 1.95 percent, making it the fifth highest in Illinois
  • Will County – This county’s effective property tax rate was 1.82 percent, making it the sixth highest in Illinois
  • DuPage County – This county’s effective property tax rate was 1.77 percent, making it the seventh highest in Illinois
  • Winnebago County – This county’s effective property tax rate was 1.54 percent, making it the 12th highest in Illinois
  • McHenry County – This county’s effective property tax rate was 1.52 percent, making it the 13th highest in Illinois

Although Kane and DuPage had higher effective rates than Cook County’s 2.19 percent, their county property taxes generate more revenue from lower median incomes, around $69,000 and $82,000, respectively.

What States Pay More than Chicago

The average property tax bill is not uniform nationwide. Some states have higher property taxes than Illinois. The highest property tax rate in the country can be found in New Jersey, where homeowners pay an average of $7,410 in annual property tax payments.

California and Illinois round out the top three, with their property tax rates being $2,913 and $2,024, respectively.

If you want a low property tax rate or avoid paying any property taxes whatsoever, consider moving to Alaska, where homeowners pay only $499 annually on average. The last state on the list is Hawaii, where property tax rates are $953.

Ok, so now that you know how Chicagoans’ property taxes stack up with those of other cities and states across the country, can we safely assume they’re fair? The next section will provide some insight as to whether they are.

Property values are also considered when determining the percentage of income that people should be taxed on after deductions. So, if your annual income is $47,000 and you own a home whose market value is $300,000, you would pay 2 percent of $47,000, which comes out to $940 annually. This tax is divided into 12 monthly installment payments of $79.17 each month.

Property Taxes & Chicago Schools

One school of thought contends that Chicago property taxes are too high considering students’ quality of education in public schools.

Although the city’s leadership has made vast improvements in education over the past decade, there is still much room for improvement.

In fact, according to a survey conducted by the University of Chicago’s Consortium on Chicago School Research, students in public schools are only as likely as students in private schools to successfully apply and be accepted into four-year colleges.

Homeowners who would rather send their children to a private school must pay tuition, averaging $11,000 per year.

Property Tax Deferral Program

If you can’t afford to pay your property taxes, a deferment program may help by suspending them for up to three years. Does this sound too good to be true? Unfortunately, it isn’t – and you’ll still be expected to pay back the full amount of property tax payments that you owe in addition to a 7 percent “charge” or penalty fee.

The Property Tax Deferral Program also comes with its own set of disadvantages. It stops you from qualifying for the Homestead Exemption, which entitles homeowners to an annual $7,000 reduction on their property taxes.

Moreover, your home’s market value will be capped at what it was in 1992 regardless of whether you have made significant improvements since then.

So why is this such a popular program? For starters, homeowners who would otherwise be unable to pay their property tax payments on time can finally afford to stay in their homes.

Another reason that may not be readily apparent is that the Property Tax Deferral Program acts as a deterrent for people from buying and flipping real estate, which drives up prices and makes it more difficult for homebuyers to find affordable properties.

Property Tax Exemptions for Senior Citizens and Disabled

Senior citizens who are 65 years of age or older and disabled people may qualify for property tax exemptions on their primary residences. This savings is especially beneficial when one of the individual’s incomes is social security.

The exemption can be applied to either yearly property tax payments or monthly installments; whichever you choose, the senior citizen or disabled resident will not have to pay anything. However, you may still want to check with your local county clerk in case there are other taxes that you’ll need to pay in addition to the ones that have been suspended.

Find Out Why People Are Falling in Love with Living in the City of Chicago

Chicago offers many amenities that other cities do not. There is shopping, dining, entertainment, and world-renowned museums.

In addition, it offers employment opportunities with its central location to other major cities such as New York, Detroit, and Dallas. So, it’s no wonder that people are flocking to the Windy City and enjoying their newfound quality of life.

Of course, great opportunities also come with great responsibilities like owning a property in Chicago and paying taxes.

If you’re contemplating whether you should purchase property here in this city, you may want to know the average amount of property taxes paid for a home in Chicago. This information will give you a better idea of what to expect when your property taxes are due.

The Internal Revenue Service (IRS) provides a table and worksheet that enables taxpayers to determine the average amount for property taxes paid for homes within their respective counties or metro areas.

These properties are divided into two categories: single-family homes and condominiums.

Conclusion

And with that, we’ve come full circle in our discussion of Chicago property taxes. You now know how they compare against average property tax rates throughout the country and what other states are paying compared to Illinois’.

Is this enough information to make an educated decision on applying for exemptions? Maybe, but it’s always best to seek professional advice, so you know for sure.

The final word of advice is to get organized and do some research on your own about property taxes in Chicago. You can start by checking out the city’s official website, which has plenty of information on every aspect of living here in the “Windy City.”

How Property Taxes in Chicago Compare to Rest of Country Resource: