Budget changes mean taxpayers will pay more
A few changes bundled in Ohio's new two-year budget will leave homeowners paying more for new property tax levies.
The two-year state budget that started in July eliminates a 12.5-percent rollback on property taxes and cuts the number of people eligible for the Homestead credit.
Prior to the passage of the new two-year budget, there was a 10-percent rollback on all residential property and a 2.5-percent rollback on owner-occupied properties, said Gary Gudmundson, communications director for the Ohio Department of Taxation. That first 12.5 percent of property taxes was picked up by the state.
"These rollbacks, beginning with levies (passed) in November of this year and in the future, will not be extended to certain property tax levies," he said. "Those include replacement levies, new levies and any additional portions of a renewal levy."
Levies often are used by school districts and county social agencies for general fund revenue.
Starting in November, any entity that passes a levy will get the same amount, but 12.5 percent more will come from local property owners instead of from the state in the form of reimbursements.
"Mechanically, what happens (now) with rollbacks is the county will look at a property owner's property tax and reduce it by 12.5 percent, assuming it's owner-occupied. The property owner pays 12.5 percent less than they normally would," Gudmundson said. "Then the state reimburses the county for the discount they extended.
"The state sends the county 12.5 percent and that money is coming from the general fund from taxpayers all over the state."
The changes will put more focus on local property taxes, Gudmundson said.
"All these taxpayers are subsidizing these local property owners," he said. "They have no voice in how their tax dollars are being spent.
"What will happen over time as levies expire is these local governments pursue more levies ... the full impact will fall onto the homeowner. They will get the true feel of their voting."
From November on, all homeowners in the state will pay $4.38 more annually per mill per $100,000 of home value.
The Homestead credit also was changed in the state budget bill, limiting the tax credit to lower-income senior citizens.
"This change really returns this program to what it had been for most of its existence," Gudmundson said. "It was means-tested for almost 40 years. When the Homestead exemption was created, it was meant to benefit low-income to low-moderate-income senior citizens.
"It was means-tested until 2007."
The Homestead exemption was expanded to all homeowners 65 years and older in 2007, no matter their income, and has become a huge cost to the state, Gudmundson said.
"Before the program was opened to everyone, it was costing about $70 million in 2006," he said. "In 2012, the program had expanded to cost $410 million.
"By 2018, they're estimating it would cost the state $533 million. ... It was really a conscious decision that the state budget can't sustain that type of growth."
With the changes to the state budget, anyone who currently receives the Homestead credit and anyone who turns 65 this year will qualify.
"The change really takes place beginning next year," Gudmundson said. "At that point -- if you turn 65 at some point after Jan. 1, 2014 -- you will be subject to a means test, which will determine if you are eligible for the Homestead exemption."
Any household making $30,000 or less in taxable income will be eligible for the Homestead credit, Gudmundson said.
For more information on the changes, click on the "New Tax Law Changes" button at tax.ohio.gov and use the scroll-down menu to access information on real property changes in the FAQ section.