A pink form came with homeowner tax bills over the past three years, and now whether you sent it back is having a big impact on what you pay.
Counties used those forms to determine whether homeowners should be receiving a deduction that can cut their tax bill in half or more. Since the forms were due last year, the county has removed deductions for about 4,900 local homes. That’s more than 10 percent of the county’s residential properties.
That deduction turns into big tax savings for a homeowner. For example, a person with a $200,000 house in White River Township pays about $1,600 in taxes with the credits, but the bill could double if that deduction is removed.
Last year the county sent out a final notice to about 7,000 homeowners, and lines formed at county offices of residents who were trying to keep the credit and prevent their taxes from spiking. The county didn’t get to remove all the deductions for properties that had not turned in the required information last year, so more might have been eliminated this year.
Homes that lost the deduction mainly were unoccupied houses, are used as rentals or had owners who didn’t return the paperwork, deputy auditor Christie Murray said. But officials are still asking homeowners to check their tax bills. If you live in your home and your deduction is gone, you should contact the auditor’s office for instructions on how to prove you live in your home so they can adjust your bill. A person will be required to bring in items such as state income tax return, voter registration file or driver’s license.
About Homestead deductions
Approximate number of residential properties in the county
Number of homestead deductions removed since last year
Amount reduced from a home’s taxable value as a primary deduction
Amount removed from the home’s remaining value as a second deduction
Total increase in property values in the county this year, in part due to removal of homestead credits
Amount the owner of a typical $100,000 home is taxed upon after deductions
Amount the owner of a typical $200,000 home is taxed upon after deductions
“We hear from them on a daily basis, ‘Well what’s going on here and what happened?’ It’s all fixable,” she said.
The total property value used to calculate taxes in the county rose by about 5 percent this year, which led to reduced tax rates in most areas. Part of that increase was attributed to the county removing so many deductions and the value property owners are taxed on increasing, county officials 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 by half the taxable value of the home.
Losing the homestead deductions not only increases taxes because of a higher taxable value but also because the property is also subject to a higher tax cap, which is based on the value and type of property.
Homeowners with a homestead deduction will only pay up to 1 percent of the total value in taxes under state property tax caps. For example, a Franklin homeowner with a $100,000 home pays $1,000 per year because of the cap.
But without the homestead deduction, that property would instead have a 2 percent cap for non-owner-occupied homes, rentals and farmland. That same Franklin homeowner would pay up to $2,000 per year in taxes.
By this year, homeowners would have received five different notices about the deduction starting in 2010, with the last one going out in summer 2013. So officials expect most of the deductions that have been eliminated likely should have been and will stay off, Murray said.