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Homestead exemption tax-roll cleanup yields windfall

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About 5,000 homes lost a major tax deduction last year, and most declined to reinstate it, boosting tax collections across the county.

The county started deleting homestead credits last year as part of a statewide tax cleanup. Homeowners can claim that credit only for the home that they live in, which means rental properties, second homes and vacation houses don’t get the large deduction.

The county started notifying taxpayers in 2010 that they needed to verify they live in their home in order to keep the deduction, which significantly reduces the value of the property for taxes. If a homeowner didn’t respond to the five or more notices sent before January 2013, the credit was removed.

A total of 7,000 notices were sent last year, which led to long lines of people coming in to verify their address and keep the credit. Of those, about 5,000 homeowners lost the tax deduction.

With the credits removed, the county now collects more tax dollars. But the county hasn’t calculated exactly how much more, Johnson County Auditor Jan Richhart said.

Since then, most of the credits that were removed have not been replaced.

Since 2013, county workers have renewed just 145 of those lost homestead credits and issued $185,000 in refunds.

“I don’t think any of these people are trying to cheat the system. It’s human error, not paying attention, or they just discovered it later when their mortgage payment went up,” auditor’s office first deputy Amy Thompson said.

Anyone who lost the credit would have made three tax payments by now.

If people discover they lost the credit and haven’t noticed until now, it can still be added back if they prove they live in the homes, Thompson said. They should call the auditor’s office first but will likely need to bring a driver’s license or past income tax returns showing they’ve lived there since 2010, she said.

“The taxpayer assumes that their lender takes care of their property taxes. It is only after the lender has dramatically increased their mortgage payment that they contact us,” auditor’s office deputy Christie Murray said.

The homestead deduction reduces the taxable value for most homes by $45,000 and then another 35 percent. For example, a homeowner with a $200,000 house gets a total of $99,250 in deductions, which reduces the taxable value by about half.

Without the credit, the property also has a higher tax cap of 2 percent, compared to 1 percent for an owner-occupied home. That tax cap limits how much a property owner can be charged in their property tax bill to a percentage of the home’s value.

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