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What property tax relief is currently provided?

What property tax relief is currently provided? In addition to the Act 1 provisions we covered last week, current law also provides for property tax relief to homeowners, renters, and non-residential property owners. The three current property tax relief provisions are for (1) a state property tax relief allocation that reduces taxes paid by and provides relief for homestead and farmstead owners; (2) a local tax relief option through local income taxes that was placed on the ballot for voter referendum; (3) a property taxpayer and rent rebate program providing relief for low-income senior citizens and disabled individuals. Over the next several days, we’ll cover these three provisions and data related to those programs.

Act 1 of 2006 provided state resources to provide property tax relief to homesteads and farmsteads. Beginning in 2008-09, the state allocated funds to school districts used for reducing the property taxes paid locally through a process called exclusion. A homestead exclusion is a portion of the assessed value of a homestead that is excluded from the amount paid by the owner. Essentially, the state reduced property tax bills by replacing a portion of the tax bill with funds from the state.

School districts certify each year the amount of assessed value excluded from school districts’ tax levy based on the allocation received from the state property tax reduction allocation. This exclusion is calculated by school districts each year and used to reduce the total tax due from each homestead and farmstead.

In 2016-17, approximately $588 million was distributed by the state to provide property tax relief through homestead/farmstead exclusions. Combining this amount with the remaining property taxes paid locally ($13.05 billion), the property tax relief allocation represents a 4.35% share of property taxes paid by the state.

Click on the image link below to view our Infogram illustrating to the share of property taxes paid by the state and locally in 2016-17.

 
As each school district calculates the exclusion amount based on the amount distributed to the school district from the state, the amount and the magnitude of property tax relief provided to homesteads within each school district varies. In 2016-17, some school districts had 1% of property taxes paid by the state through the property tax reduction allocation while others had as much as 18%.

Each year, the PDE publishes an estimated property tax relief per homestead calculation using each school districts’ property tax reduction allocation divided by the number of homesteads. While the actual relief per homestead is calculated by the district based on changes in tax levy and assessed value, the PDE calculations provide an approximate illustration of the varying amount of relief provided per homestead.

Taking the data covered last week on homesteads and median assessed value, we can use tax bill for homestead at the median AV for each district and compare the tax bill to the amount of tax relief per homestead provided by the state. The difference between the two measures represents a reduced tax bill on a homestead at the median AV and the % relief provided to the homestead at the median AV can be estimated.

Click on the image link below to view our interactive map illustrating for each school district the estimated property tax relief per homestead provided in 2018-19 and the estimated tax bill (before relief) for a homestead at the median AV in 2018-19.